Trade Groups Push For Flood Insurance Extension Ahead Of Potential Government Shutdown

With a federal government shutdown looming, a coalition of 12 organizations representing the housing and insurance sectors has sent a letter to Congress, urging an extension of the National Flood Insurance Program (NFIP) that is set to expire on Friday.

“Another lapse of the NFIP will leave millions of Americans at risk and disrupt the purchase of flood insurance in more than 22,000 communities across the United States including those still recovering from devastating storms such as Hurricanes Helene and Milton,” the letter stated.

The coalition includes the American Land Title Association (ALTA), the Mortgage Bankers Association (MBA) and the National Association of Home Builders (NAHB).

Since 2017, the NFIP’s authority has been extended 31 times and has also lapsed briefly on several occasions. Administered by the Federal Emergency Management Agency (FEMA), the program was originally established by Congress through the National Flood Insurance Act of 1968.

More than 50 private insurers participating in the NFIP operate under a “write your own” program, allowing them to issue flood insurance policies. Funding to cover some claims is borrowed from the Department of the Treasury. The program is available in 22,000 communities nationwide, all of which must adopt and enforce regulations aimed at reducing flood damage.

The program’s expiration coincides with a potential U.S. government shutdown, as a bill backed by President-elect Donald Trump failed to pass. The legislation was defeated in a vote of 235-174, with 38 Republicans voting against it. Lawmakers have until midnight Friday to reach a consensus and avert a shutdown.

If the NFIP lapses, Americans would be unable to purchase new flood insurance policies, although existing policies would remain active until their renewal dates. Without new coverage, affected individuals would need to rely on limited federal disaster aid, the coalition of trade groups warned.

“Property buyers could lose financing or be forced to pay fees to hold interest rates, as NAR estimates that lapses threaten 1,300 property sales each day,” the groups said in the letter. “Some property owners could be subject to lender-placed insurance by their mortgage servicers, which is typically more costly than borrower-obtained insurance, resulting in even more cost burdens on American families.” 

In the House of Representatives, the letter was addressed to Speaker Mike Johnson and Democratic leader Hakeem Jeffries. In the Senate, it was sent to Majority Leader Charles Schumer and Republican leader Mitch McConnell.

To ensure greater stability and predictability for this essential program, the trade groups urged Congress to pass the NFIP Extension Act of 2024, which has been introduced in both chambers and would extend the program’s authorization until Sept. 30, 2025.

Since its inception, the NFIP has processed a total of 2.6 million claims. In 2023 alone, more than 21,000 claims were submitted, resulting in $1 billion in payouts. Currently, the NFIP provides coverage for 4.6 million properties.