Federal financial institution regulatory agencies have issued a reminder to lenders that they may continue to make loans covered by federal flood insurance statutes even when the National Flood Insurance Program (NFIP) is unavailable. The agencies clarified that during a lapse in the NFIP, lenders are not required to mandate federal flood insurance for these loans.
The agencies referenced the Interagency Questions and Answers Regarding Flood Insurance, specifically Q&A Applicability 12, which states: “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.” The guidance also notes that lenders should assess safety, soundness, and legal risks and manage those risks prudently during any period when the NFIP is not available. Additionally, it addresses issues related to private flood insurance.
