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National Flood Insurance Program Reauthorized Through May 31, 2010

April 16, 2010

On April 15, Congress reauthorized, and the President signed into law, an act that includes reauthorization of the National Flood Insurance Program (NFIP) through May 31, 2010. This temporary measure is retroactive to March 28, 2010, the date the NFIP’s authority expired, and provides the NFIP the ability to issue new and renewal flood insurance policies and increase coverage on existing policies.

Seller/Servicers who accepted interim evidence of NFIP coverage during the lapse in the NFIP’s authority must follow up to ensure that they receive final evidence of coverage meeting the requirements of Single-Family Seller/Servicer Guide (Guide) Section 58.7.

As a reminder, Freddie Mac’s policies on flood insurance in Chapters 46 and 58 of the Guide remain unchanged regardless of the status of the NFIP. These include:

• Seller/Servicers originating mortgages for sale to Freddie Mac must continue to perform flood zone determinations.
• Dwellings on mortgaged properties in Special Flood Hazard Areas must have flood insurance; and mortgages delivered to us on such properties must have evidence of flood insurance.
• For Servicers, payments to renew expiring policies must be effected as scheduled when servicing Freddie Mac mortgages.

If a borrower applies for NFIP flood insurance, acceptable evidence pending issuance of a final NFIP policy must include one of the following:

• A completed and executed NFIP Flood Insurance Application plus a copy of the borrower’s premium check or agent’s paid receipt;
• A completed and executed NFIP Flood Insurance Application plus the final HUD-1 form reflecting the flood insurance premium collected at closing;
• A completed and executed NFIP General Change Endorsement Form showing the assignment of the current flood insurance policy by the property seller to the borrower; or
• An agent-executed NFIP Certification of Proof of Purchase of Flood Insurance

A borrower whose property is determined to be in a Special Flood Hazard Area must provide the lender with proof of purchase of flood insurance no later than at closing. He or she may choose NFIP flood insurance or private flood insurance that provides coverage at least equivalent to that provided by the NFIP.