The Federal Emergency Management Agency (FEMA) on Friday reversed its decision to suspend the sale of new flood insurance policies under the National Flood Insurance Program (NFIP) during the government shutdown.
It was just a week ago, on Friday, Dec. 21, that Congress reauthorized the NFIP until May 31, 2019.
But on Wednesday, FEMA announced that it was suspending sales of flood insurance policies for homeowners under the NFIP “due to the lapse in annual appropriations for the Department of Homeland Security,” which appropriates funding for the program. In addition, the agency said it would not be able to process renewals of existing policies.
Faced with fierce criticism for its decision, FEMA on Friday reversed course, saying in a statement that “all NFIP insurers have been directed to resume normal operations immediately and advised that the program will be considered operational since December 21, 2018 without interruption.”
The agency’s initial decision to suspend the program was met with scorn from industry associations. In a statement on Thursday, Robert D. Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), urged officials at FEMA “to reconsider their decision not to issue new NFIP policies or renew existing policies during the current shutdown.”
“We have heard concerns from some MBA members that the inability to secure the required flood insurance may jeopardize loan closings,” Broeksmit said. “FEMA should reverse its decision. The longer this shutdown goes on, the more disruptive this decision will be.”
Shannon McGahn, senior vice president of government affairs for the National Association of Realtors (NAR), said on Wednesday that the ruling “comes contrary to Congressional intent and is in conflict with FEMA’s decision to allow NFIP operations during the 16-day government shutdown in 2013.
“NAR and its 1.3 million members are extremely disappointed by this abrupt and ill-conceived change of course,” McGahn said. “Last week, Congress passed legislation to fully reauthorize the NFIP through May. However, [Wednesday’s] surprise FEMA ruling jeopardizes tens of thousands of home sales across America, as NAR estimates up to 40,000 closings are disrupted each month that the NFIP cannot issue flood insurance policies.”
NAR said it played a role in getting the program reinstated.
“FEMA and the Administration deserve credit for hearing our concerns and acting swiftly to address them,” John Smaby, president of NAR, said late Friday in a statement. “This new decision means thousands of home sale transactions in communities across the country can go forward without interruption, as Congress intended when it renewed the flood insurance program earlier this week.”