Last Thursday, September 30th, President Biden signed legislation that averted a partial federal shutdown and keep the government funded, including reauthorizing the National Flood Insurance Program (NFIP) through December 3rd. The NFIP was authorized to expire September 30th at 11:59pm.
The House approved the short-term funding measure by a 254-175 vote not long after Senate passage in a 65-35 vote. The legislation was needed to keep government running once the current budget ended at midnight Thursday. Passage will buy lawmakers more time to craft the spending measures that will fund federal agencies and the programs they administer.
While this short-term funding bill avoids a lapse in the NFIP, it’s always good to be reminded of what to do should the NFIP undergo a short period lapse. The prudential regulators—the FDIC, OCC, and Federal Reserve—have each released guidance on what to do if the NFIP lapses. This guidance was originally issued in 2010, but remains applicable in the event of any lapse. It is well worth the time to re-review the appropriate guidance and consult with counsel to apply it to the bank’s specific business operations.
Please note that flood determinations, disclosures and notices to borrowers and other regulatory requirements must continue during a lapse. Moreover, lenders should carefully evaluate safety and soundness risk and adequately document the bank’s management of those risks during a lapse, including the consideration of the overall portfolio risk created by a lapse in coverage.
OSC and SUI remain committed to implementing risk management program practices that have been vetted and adopted by our lending clients during any NFIP lapse.