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#2201519 - 12/27/18 05:01 PM FEMA Announces NFIP in "limited ability" ??
Compliance Buzz Offline
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We were advised by our state bankers association this morning of FEMA's announcement yesterday. FEMA announced the limited operations despite Congress passing and President Trump signing legislation last Friday right that supporters contend was meant to keep the program running even during a shutdown. The flood program was set to expire at midnight on Dec. 21. The new law reauthorized the NFIP until May 31, 2019.

Anyone hearing anything about this?

Full article here Insurance Journal Article excerpts below:

On Wednesday, Dec. 26, FEMA announced changes to the operations of the National Flood Insurance Program (NFIP) in response to the U.S. government partial shutdown. FEMA said NFIP insurance policies that were in force before midnight on Dec. 21, 2018 remain in force and claims under those policies will be paid. However, FEMA also said the NFIP will now have “limited ability” to issue new policies, issue increased coverage on existing policies, or issue renewal policies. FEMA did not define “limited ability” or indicate how long this change would be in effect.
Last edited by Compliance Buzz; 12/27/18 05:03 PM. Reason: link corrected
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Flood Compliance
#2201526 - 12/27/18 05:32 PM Re: FEMA Announces NFIP in "limited ability" ?? Compliance Buzz
rlcarey Online
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They pulled that off of the website - without consideration of when it was posted:

Due to the lapse in federal funding, this website will not be actively managed. This website was last updated on December 21, 2018 and will not be updated until after funding is enacted.
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#2201527 - 12/27/18 05:37 PM Re: FEMA Announces NFIP in "limited ability" ?? rlcarey
mtngrrl Offline
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Originally Posted By rlcarey
They pulled that off of the website - without consideration of when it was posted:

Due to the lapse in federal funding, this website will not be actively managed. This website was last updated on December 21, 2018 and will not be updated until after funding is enacted.


What are you saying? That the entire article was based on the FEMA message that the website won't be updated? What do you mean by "without consideration of when it was posted"?

Respectfully sir, can you please use more words?
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#2201529 - 12/27/18 05:48 PM UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
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ABA just issued Statement on FEMA's decision to halt flood insurance

For Immediate Release

December 27, 2018
ABA Media Contact: Blair Bernstein
(202) 663-5468
Email: bbernste@aba.com
Follow us on Twitter: @ABABankers

ABA Statement on FEMA Decision to Halt National Flood Insurance Program

By Rob Nichols, ABA president and CEO

​“On December 26, the Federal Emergency Management Agency announced its intention to halt regular operations for the National Flood Insurance Program. This decision comes even as Congress passed and the President signed legislation last week that was specifically intended to keep the program operating during the government shutdown.

“FEMA’s unexpected decision will complicate and delay loan closings for borrowers who are required to carry flood insurance and seek NFIP coverage for as long as the government shutdown continues. This result is in direct conflict with what Congress and the President intended when legislation was passed and signed into law last week to extend the NFIP’s authorization for six months. FEMA’s failure to inform Congress and the public earlier that such action would be taken despite the passage of the extension is distressing. We hope that FEMA will reconsider this unfortunate action immediately.

“We commend the leadership shown by Congress to ensure continued access to flood insurance for Americans in flood-prone areas. We will continue to work with Congress and the administration towards long-term reforms that increase the availability and affordability of coverage for all at-risk properties.”
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#2201532 - 12/27/18 06:13 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
rlcarey Online
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Well, if there is an official FEMA announcement other than what was on the website on Dec 21st prior to Congress reauthorizing the NFIP - I surely cannot find it.

This is what currently appears on the website which was published prior to the reauthorization:

Policies that were in force before midnight on December 21, 2018 remain in force. The NFIP will process and pay claims under those policies as usual from the National Flood Insurance Fund and the National Flood Insurance Reserve Fund until depleting these funds, but will not have authority to borrow any additional funds from the U.S. Treasury. Existing flood insurance policies remain valid regardless of FEMA’s capacity to pay claims. FEMA and Congress have never failed to honor the NFIP’s contracts with policyholders.

The NFIP and its WYO partners may not issue new contracts for flood insurance during a lapse in authority unless Congress passes legislation reauthorizing the NFIP. During a lapse in authority, the NFIP will have limited ability to issue new policies, issue increased coverage on existing policies, or issue renewal policies.
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#2201534 - 12/27/18 06:19 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
rlcarey Online
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Although FEMA is part of Homeland Security - so likely all their staff is on furlough - even if the insurance program itself received an extension.
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#2201632 - 12/28/18 04:11 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
Glutes Offline
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Soooo, if the NFIP is not issuing new flood policies, Bank's can originate designated loans without an NFIP flood policy during this period without penalty since the NFIP isn't issuing policies correct?

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#2201636 - 12/28/18 04:13 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
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Not sure about that. It is not like where the NFIP has not been reauthorized. FEMA is just saying they are not going to issue them while the gov't is shut down. You would need to clarify with your regulator. We have never been in this specific situation before.
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#2201638 - 12/28/18 04:21 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
rlcarey Online
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That is the $64,000 question. No word from the regulators.

Here is what FNMA has to say about it: https://www.fanniemae.com/content/announcement/ll1806.pdf
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#2201646 - 12/28/18 05:22 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
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We have an existing loan in SFHA whose flood insurance expires today 12/28/2018. The borrower paid the insurance premium already to renew the policy, but the insurance agent emailed us explaining the situation, that the policy cannot be renewed, and will be released when the gov. shutdown is over.

I did the review of the existing loans in flood, and found that there are more loans for which the insurance will be expiring soon.

This case, if the shutdown continues beyond the 30-day grace period (the property is insured for flood damage during the grace period as long as the premium is paid by the 30th day from the expiration date), should we notify the borrower to purchase a private insurance (meaning if they do not, we need to forceplace?) or is it going to be paid for claims for damages that happen during the period of the lapse? I know the possibility is thin, but just wonder for the rare case.
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#2201647 - 12/28/18 05:29 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
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If they have made the payment to the agent then the renewal will be issued when the gov't re-opens and the policy will be backdated. Send your 45 day letter - I would include a cover letter saying that receipt of the policy renewal information by the bank may have been delayed due to the government shutdown and wait until the 45 days expire before you actually force place. This should all blow over by then.
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#2201697 - 12/28/18 07:37 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
M&M Offline
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In this instance, couldn't you mail the 45-day letter, force place immediately, and just not charge them yet? You'll more than likely wind up canceling the policy when this is all resolved, and the customer's renewal can kick in back to the renewal date. We have a similar situation coming up next week, except that as far as I'm aware, the customer hasn't renewed their policy yet.

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#2201698 - 12/28/18 07:44 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
mtngrrl Offline
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Here, finally, is the statement directly from FEMA confirming that they won't be issuing new policies despite reauthorization:

https://www.fema.gov/news-release/2018/12/27/fema-statement-effects-lapse-appropriation-nfip
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#2201703 - 12/28/18 08:18 PM Re: UPDATE: ABA Issues statement on FEMA's Decision M&M
rlcarey Online
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Originally Posted By M&M
In this instance, couldn't you mail the 45-day letter, force place immediately, and just not charge them yet? You'll more than likely wind up canceling the policy when this is all resolved, and the customer's renewal can kick in back to the renewal date. We have a similar situation coming up next week, except that as far as I'm aware, the customer hasn't renewed their policy yet.


That definitely works also, but their NFIP policy is actually still effective for the mortgagee for 30 days.
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#2201733 - 12/28/18 10:09 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
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The following is the FDIC's guidance to lenders issued back in 2010 regarding a lapse in NFIP funding. The other agencies should have similarly issued guidance regarding NFIP "lapse" periods.

https://www.fdic.gov/news/news/financial/2010/fil10023.html

While the circumstances are different resulting in the lapse, the end result is the same. NFIP policies are not being issued. One cannot purchase an NFIP flood insurance policy at this time. This is not the first time we've dealt with a scenario where an NFIP Policy could not be purchased.

Not sure it matters that this lapse is derived from Congress failing to reauthorize or whether it is indirectly arrived at via a lapse in annual appropriations to the Department of Homeland Security which is what FEMA's explanation provides... I believe the guidance provided above by the FDIC at least for state banks is still applicable. It's providing guidance to banks on what should be done when an NFIP Policy is unable to be purchased due to a scenario like the one we currently find ourselves in.

What this says in a nutshell is that a Bank can close a designated loan requiring flood insurance without flood insurance during a time when the NFIP is not issuing new policies. It can do this without penalty. However, once the NFIP is back online, the requirement for the borrower to still obtain flood insurance still applies and the Bank would require the flood insurance at that point... BUT for scenarios where the current situation impacts closing or booking a loan, a Bank should be able to do so without obtaining an NFIP policy that cannot be purchased.

I've requested confirmation from our examiner that the 2010 guidance provided above is still applicable in this scenario. I haven't received a response yet, but I would question a response that provides that it is not applicable.

I'll follow up with the FDIC's response when received.

Thanks.

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#2201734 - 12/28/18 10:22 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
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FDIC just issued this press release confirming that we can follow the 2010 guidance:
________________________________________
Agencies Issue Statement on Financial Institutions Issuing Loans When National Flood Insurance Program is Unavailable

The federal bank regulatory agencies remind banks, savings associations, and Farm Credit System institutions that they can continue to make loans during periods when the National Flood Insurance Program (NFIP) administered by the Federal Emergency Management Agency (FEMA) is unavailable.

The attached guidance issued in 2010 is generally applicable whenever the NFIP is unavailable. As explained in the guidance, lenders may continue to make loans subject to the federal flood insurance statutes without flood insurance during a period when the NFIP is not available. However, lenders must continue to make flood determinations, provide timely, complete, and accurate notices to borrowers, and comply with other parts of the flood insurance regulations. In addition, lenders must evaluate safety and soundness and legal risks and prudently manage those risks during the lapse period.
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#2201737 - 12/28/18 10:24 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
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#2201745 - 12/29/18 02:08 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
rlcarey Online
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Nothing like a huge flip flop to waste everyone's time:

https://www.fema.gov/news-release/2018/1...priations-lapse
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#2201759 - 12/31/18 03:02 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
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So what is the bottom line on the issue for next time? I'm FDIC-regulated, so do I have a 'don't need a policy in place, get out of jail free' card from them to keep closing loans during the next shutdown? I suppose the FDIC could change their mind the next time around, or can't they do that based on prior history in similar situations?
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#2201760 - 12/31/18 03:07 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
rlcarey Online
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I would imagine that it would be the same as always. Why anyone would include this sort of event in a policy is a little beyond me.
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#2201824 - 12/31/18 08:48 PM Re: UPDATE: ABA Issues statement on FEMA's Decision Compliance Buzz
John Burnett Offline
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For now, we appear to be "good" until 5/31/19. If Congress extends the NFIP authorization beyond that date, it will continue to be "business as usual." But if The NFIP authority is again allowed to lapse, Friday's statements from the OCC, Fed and FDIC confirm you can rely on their 2010 guidance to continue lending in flood areas without coverage, with the caveats included in those 2010 guidance documents.
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