The NFIP has lapsed. Here’s what it means

The National Flood Insurance Program (NFIP) expired at midnight on September 30, the end of the fiscal year, leaving homeowners largely unable to secure new flood insurance or renew existing policies. As a follow-up to last month’s member alert, below are answers to some common questions you might have. 

What happens during a lapse? 

• The NFIP cannot issue new or renew existing flood insurance policies until the program is reauthorized. Consumers who had a pending flood policy application or renewal should confirm with their agent that they have coverage.
• Homeowners with active NFIP policies will still be covered until their expiration date, including a 30-day grace period. 
• The NFIP will continue to adjust and pay claims for its policyholders, as long as funds are available. If those funds are depleted, claims payments would be delayed until additional funds become available as the NFIP collects premiums or Congress provides for additional borrowing authority.
• Private flood insurance is not affected. 

What does the lapse mean for homebuyers?

• In some cases, homebuyers may be able to assume the seller’s existing NFIP policy.  
• Lenders may continue making loans during an NFIP lapse, but must still conduct flood determinations, provide accurate borrower notices, and follow all other flood insurance regulations. They are also expected to manage safety, soundness, and legal risks, and consider private flood insurance options. (see Federal Reserve press release)
• Private flood insurance remains an option and should be strongly considered.

Are floodplain regulations on hold during the lapse?

• No. Communities must continue enforcing their local floodplain management regulations. Local ordinances are adopted as a condition of a community's participation in the NFIP. They are legally adopted local land use standards and FEMA will expect communities to continue administering and enforcing their regulations, even when the NFIP is lapsed. 

What is ASFPM doing? 

• Maintaining regular communication with Congressional leaders and the White House.
• Collaborating with partner organizations in efforts that advance long-term NFIP reauthorization. 
• Engaging with members of Congress to highlight the impacts of the lapse and emphasize the NFIP’s importance to communities nationwide.
• Elevating awareness of the issue through targeted outreach, policy statements, and media engagement.

NFIP’s last long-term reauthorization was in 2012 with the Biggert-Waters Flood Insurance Reform Act. Since the end of 2017, there have been 33 short-term reauthorizations.

Additional News & Resources 

• FEMA guidelines (2024) 
• FDIC - Joint press release with FCA, FRB, NCUA, and OCC
• Fannie Mae (scroll to section titled “Requirements During a National Flood Insurance Program Lapse”) 
• Freddie Mac - Guidance Related to the Federal Government Shutdown 
• Associated Press - National Flood Insurance Program is set to expire Tuesday, halting new policies and some home loans
• Realtor.com - Congress Let the National Flood Insurance Program Expire. Here’s Who’s in Trouble First
• The Insurer - NFIP lapse creates opportunity for private flood insurance market
• National Low Income Housing Coalition - Authorization for National Flood Insurance Program Lapses Amid Shutdown 

The ASFPM Policy Team will continue to provide updates as we learn more. If you have any questions, please reach out to us here.