Katie BaileyFederal financial institution regulatory agencies have issued a reminder to lenders that they may continue to make loans subject to federal flood insurance statutes even when the National Flood Insurance Program (NFIP) is unavailable. During such periods, lenders are permitted to proceed with these loans without requiring federal flood insurance coverage.
According to the Interagency Questions and Answers Regarding Flood Insurance (Applicability Q&A 12), lenders must still complete flood determinations, provide timely and accurate notices to borrowers, and comply with other applicable parts of flood insurance regulations.
Regulators emphasize that institutions should continue to evaluate safety, soundness, and legal risks and manage those risks prudently during any lapse in the NFIP. The guidance also clarifies expectations surrounding the availability and use of private flood insurance.
