Since Congress failed to re-authorize the NFIP, it seems to me that, until Congress re-authorizes the program once the new session begins, it will be illegal to make loans on properties located in flood zones unless the premium for the policy is received before January 1, 2003. Agree or disagree?

Yes.

We'll have to wait for the promised guidance from the regulators.

There is private insurance which should still be available and I have read that the costs are the same, and are different. That means I don't know for sure what the impact is.

Our bank blanket policy is privately underwritten. A couple of months ago, I did a comparison for a large commercial customer who did not want to renew his flood insurance. If I force-placed it under our private policy, the premium was 4 times the amount of premium that the customer would pay if he bought an individual policy underwritten by FEMA.

I don't know if everyone has had that experience (if not, I guess we need to get bids on a blanket policy again!) - but that's a substantial difference. Several thousand dollars, in this case.

I don't doubt it but wonder if a customer, contacting their agent, would get the same premium quote. I recall the VSI philosophy was they need it from the bank because they can't get it elsewhere. That makes it a higher risk and more costly. The industry may carry that over to SFHAs as well.

I recently spoke with our regulator (FDIC). They have stated that we should have the customer get a letter from the insurance agency stating that the insurance policy could not be written at this time, etc. By that statement, it appears that we could close the loan with this type of letter in the file.......however, I wouldn't go to the bank on it...........(so to speak). It just seems that someway there will be action taken on this prior to year end.

We sell the majority of our loans and since our contract with the secondary market investors requires flood insurance we will stop closing loans with collateral in flood zones in January. We will accomodate shelf loans and good customers by accepting the risk but will not do so for loans sold into the secondary market.