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Insurance Requirements Remain Unchanged During Lapse of National Flood Insurance Program

January 22, 2018

The authority of the National Flood Insurance Program (NFIP) to issue new or renewal flood insurance policies or to increase coverage on existing policies expired at midnight on Friday, January 19.

During this lapse in the NFIP's authority, Freddie Mac's policies on flood insurance in Section 31.8 of the Freddie Mac Multifamily Seller/Servicer Guide (Guide) remain unchanged. Freddie Mac cannot make, increase, renew, or extend a loan securing a property with buildings located in a Special Flood Hazard Area (SFHA) unless flood insurance meeting the mandatory purchase requirements of the Flood Disaster Protection Act (FDPA) is in place.

During a lapse in the NFIP authority, Seller/Servicers must ensure that Borrowers obtain coverage from private insurers that meets the Guide requirements as well as the mandatory purchase requirements of the FDPA for new and existing loans.
If flood insurance through a private insurer does not include a deductible that meets the mandatory purchase requirements of the FDPA, then the Borrower may apply for NFIP flood insurance as an interim measure to fill the gap in coverage. The Borrower may provide the Seller/Servicer with one of the following as acceptable evidence that the Borrower has applied for an NFIP policy:

  • A completed and executed NFIP Flood Insurance Application, plus a copy of the Borrower's premium check or agent's paid receipt
  • An agent-executed NFIP Certification showing proof of purchase of flood insurance

Seller/Servicers that accept interim evidence of NFIP coverage during the lapse in the NFIP's authority must follow up once the NFIP's authority has been reinstated to ensure that the Seller/Servicer has final evidence of coverage meeting the Guide requirements.