FLOOD INSURANCE

Because the US Congress argued over funding, the deal on flood insurance fell apart over the weekend. If you are working a transaction that involves flood insurance, contact your closing attorney ASAP. The US Congress failed to reach consensus on a spending bill last weekend so flood insurance is now a serious issue threatening transactions.The current situation is the result of the House and Senate's failure to agree on how to pay for the reauthorization of NFIP, along with a number of programs including unemployment insurance, COBRA health coverage, etc. that are all together in one bill.

For a while now, all that has been possible is a series of short term extensions. Before Congress recessed, all reports were that a deal was near; obviously it fell apart. There have been six flood extensions since September of 2008, and this is first one since 2002 where the program was not extended within a few days of the expiration date. Right now, NAR efforts are focused on clarifying with Federal agencies, GSEs, and the bank regulators, what is permitted. And, what they can do to help clarify what options lenders have.

The OTS guidance is an example of that. Also see the excerpt from the NFIP Manual in the adjacent sidebar, for further confirmation. NAR should have something from FHA and Fannie tomorrow; Freddie has issued something confusing, and NAR is seeking clarification. They will provide an update with the guidance, and have issued a targeted and expanded Call For Action. Unfortunately flood insurance has been caught up in a larger political debate over the federal deficit.

For more information, use these links:OTS GuidanceFEMA Memo & FAQsIf you're experiencing closing issues, please contact the SCR Legal Hotline at 800-233-6381 or email Byron King. Sincerely,Byron KingSCR VP & General Counsel