Four federal financial institutions regulators issued a reminder Wednesday to lenders that they are still allowed to make loans subject to federal flood insurance laws when the National Flood Insurance Program (NFIP) is not available, including during the federal government shutdown that began today.
The shutdown is the result of Congress and the White House failing to reach agreement on appropriations legislation or a continuing resolution to keep operations going until a larger agreement is reached.
The regulators – Federal Reserve Board, Federal Deposit Insurance Corp. (FDIC), National Credit Union Administration (NCUA), and Office of the Comptroller of the Currency (OCC) – said while the NFIP is unavailable, lenders can make loans without requiring flood insurance. They provided a link to a set of Q&As that were issued as guidance in May 2022 generally on the federal flood insurance program. Those include a Q&A that explains how lenders should proceed when making loans subject to flood insurance during a lapse in the NFIP or in federal government appropriations.
“As explained in the Interagency Questions and Answers Regarding Flood Insurance, in Q&A Applicability 12, lenders may continue to make loans without flood insurance coverage during this time but must continue to make flood determinations; provide timely, complete, and accurate notices to borrowers; and comply with other applicable parts of the flood insurance regulations. In addition, lenders should evaluate safety and soundness and legal risks and should prudently manage those risks during the lapse period,” the agencies said. “The guidance also addresses the availability and use of private flood insurance.”
The Farm Credit Administration (FCA) joined the financial institutions regulators in Wednesday’s release.
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