Rich Hauswirth, CIC, CPIA Flood Insurance Expert

President Obama late Thursday signed into law legislation extending the National Flood Insurance Program–averting what would have been another shutdown of the program. The law will extend the NFIP until September 30, 2011.

This extension means that property owners across the country who need flood insurance coverage will continue to be able to obtain it while the NFIP reform process proceeds.

Congress is currently working on the Flood Insurance Reform and Priorities Act of 2010, which has already been passed overwhelmingly on a bipartisan basis in the House. H.R.5114 extends the program for a full five years and makes key substantive reforms. The National Flood Insurance Program has lapsed three times this past year. It has become a highly sensitive issue because it is more than $18 billion in debt.

As a result, the federal flood insurance program’s authority to write new policies ends on Sunday, March 28, at midnight. After that time, insurance agents will not be able to provide new or renewal flood insurance policies, which are required by lenders to close on some real estate sales.

A similar hiatus occurred at the end of February and the NFIP was closed for several days until Congress renewed it on March 2. But this time the hiatus will be longer, as Congress is not scheduled to reconvene until April 12. At that time, Congress could renew NFIP retroactively.

While no new policies can be issued during a lapse in NFIP authorization, consumers with current flood insurance policies remain covered. Claims payments are not affected. But in a time when the real estate market is just crawling out of the basement, this will delay any real estate closings for properties in flood hazard areas where mortgage financing is required.

Chances are good however that congress will pass this measure when they return and make it retro-active back to March 28th.