Mortgage lenders support renewal of National Flood Insurance Program

Lenders are asking lawmakers to enact yet another temporary extension for the National Flood Insurance Program, responsible for covering more than 4.7 million homeowners.

Congress leaders were on track wednesday pass an interim bill to keep the government, including the Federal Emergency Management Agency, which oversees the NFIP, funded until Dec. 20. The NFIP, which has seen 30 short-term extensions since the end of fiscal year 2017, provides nearly $1.28 trillion in coverage, according to the government.

A government shutdown would prevent mortgage applicants from taking out home loans without required coverage in federally designated flood zones. Existing coverage would continue until the end of the policy term, while NFIP loans from the government would be drastically reduced.

Capitol Hill’s last-minute effort, with funding set to expire Sept. 30, comes on the eve of a hurricane expected to hit the Southeast and mid- booming mortgage business on falling rates.

The Mortgage Bankers Association on Wednesday asked Congress to approve its continuing resolution, which would also keep housing programs at federal agencies.

“The MBA urges the House – and then the Senate – to pass this temporary but critical funding package to ensure the continuity of critical government programs and operations that support the single-family and multifamily housing markets and consumers,” said Bob Broeksmit, MBA President and CEO .

NFIP was criticized its rising coverage costsin particular in a process by the states which is supported by some regional mortgage lenders.

The program faces its own financial constraints as it is more than $20 billion in debt with a borrowing limit of $30.4 billion. Previous government extensions have not provided additional funding for the program, according to a congressional report.

Flood insurance woes add up increasing homeowners insurance costs. Faced with inflation and more costly natural disasters, private home insurers have scaled back operations and significantly increased rates. Statewide warranties are also limited; Florida’s “insurer of last resort,” Citizens Property Insurance Corp., has grown significantly in recent years and is now asking for a rate increase.

Homeowners can access a private flood insurance market, but those policies can be more expensive, said Patty Brown, senior vice president of underwriting for Atlantic Bay Mortgage. The Virginia Beach lender says it is working with Community Home Lenders of America and government-sponsored businesses on insurance restriction guidelines.

“They’re not backed by the federal government, so repairs or insurance payouts won’t be as fast as through NFIP,” she said of private flood insurers. “Coverage is more expensive, but it may not be enough.”

Destructive floods can cost up to $9.4 billion in estimated flood damage annually to homes with federally backed mortgages and could cost government mortgage sponsors $275 million in costs this fiscal year, according to two Congressional Budget Office reports.

While some lawmakers, notably both of Louisiana’s Republican senators, have called for a long-term reauthorization of the program, the debate will persist with a new-look Congress after the elections. Atlantic Bay’s Brown asked why Congress couldn’t avoid constant renewal deadlines.

“It’s a good program, it works,” she said. “As a lender, we work to make it easier for people to get into homes, not harder. So programs like the NFIP are critical to our commitment to getting people into homes.”