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Continuing Resolution Also Extends the Flood Insurance Program

On Monday, after a three-day government shutdown, President Trump signed a temporary continuing resolution funding bill (“CR”) to keep the government running until February 8th.  While most people following the shutdown drama focused on questions like whether soldiers would be paid, courts would stay open or regulatory agencies would function, an issue unrelated to government funding, important to the loan market  but very much connected to the budget issue was the National Flood Insurance Program (“NFIP”).

Flood Insurance Continues to Flow for Now

Last Friday, president Trump signed a temporary government funding bill to keep the government funded until December 22nd.  The bill also keeps the National Flood Insurance Program operational through that date.  The NFIP was set to expire last Friday after being extended once at the end of September.  

Commercial Flood Insurance Relief: Yes, but Not Now?

As reported in Politico, on Tuesday the House of Representatives passed HR 2874, a series of bills that would extend the National Flood Insurance Program (NFIP), which is set to expire on December 8th, for five years.  The good news?  Section 202 of the bill would get rid of the current NFIP mandate that requires flood insurance on commercial properties. The not-so-good news?  The carve-out for commercial properties is not scheduled to kick in until the beginning of 2019.  Why is this important?

Commercial Flood Insurance Relief On Hold For Now

As we have all read, flooding from hurricanes Harvey and Irma have devastated parts of Texas and Florida and those states are assessing the damage and putting the pieces back together.  Although quite minor in the overall scheme of things, the loan market has experienced at least a temporary reversal on an issue related to that flooding, i.e., mandatory flood insurance for commercial properties under the National Flood Insurance Program (NFIP).

Flood Insurance: Moving Forward

Over the past two weeks there have been two important developments related to the reauthorization of the National Flood Insurance Program (“NFIP”) which runs out on September 30, 2017.  First, the Senate Banking Committee published the text of a bipartisan reauthorization bill.  Unfortunately, unlike reauthorization bills that passed through the House Financial Services Committee (“HFSC”) in May (discussed in our May 18th post), the Senate bill would not reverse a burdensome provision in the NFIP that requires banks to ensure that real property collateral securing a commercial loan that is located in a federally designated flood zone be adequately insured.

Flood Waters Recede?

This week the House Committee on Financial Services took the first step in a process that could reverse an obscure and burdensome provision of a law that requires banks to ensure that real property collateral be insured under the National Flood Insurance Program (“NFIP”).  The law requires federally regulated lenders to determine whether improved real property collateral securing a loan is located in an area designated by the FEMA as being subject to special flood hazards (“SFHA”), and, if so, to ensure that adequate flood insurance covers the structure.

Will The Flood Waters Recede?

An obscure and burdensome rule that requires banks to ensure that real property collateral be insured under the National Flood Insurance Program (“NFIP”) may be going down the drain.  The rule requires federally regulated lenders to determine whether improved real property collateral securing a loan is located in an area designated by the Federal Emergency Management Agency (“FEMA”) as being subject to special flood hazards (“SFHA”), and, if so, to ensure that adequate flood insurance covers the structure.  The obligations on the banks kick in through a number of “tripwire events” such as making, increasing, renewing or extending a loan (perhaps appropriately called “MIRE”).   (See slide 29 of The (Loan) World).

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