Lapse in flood insurance program could stymie home closings in NC

The National Flood Insurance Program (NFIP) is facing another funding freeze that could leave millions of high-risk properties in limbo or uninsured, including in North Carolina.

After a 43-day lapse triggered by the federal government shutdown last November, lawmakers extended the program until midnight on Jan. 30.

Unless reauthorized or amended by Congress, NFIP cannot issue or renew policies, potentially stalling tens of thousands of home closings each month, experts warn.

It could also have ripple effects across the mortgage market.

NFIP is "in real trouble," Insurance Commissioner Mike Causey told The N&O on Friday. "It's my hope that Congress resolves this issue."

He added: "I urge people to obtain flood insurance before the deadline."

Meanwhile, lawmakers are facing mounting pressure to overhaul a system that has been under scrutiny for years and is currently over $22 billion in debt.

Since the late 1960s, NFIP has anchored mortgage eligibility and collateral in flood-prone areas. Managed by the embattled Federal Emergency Management Agency, it accounts for 88% of the nation's flood insurance. It has over 4.6 million flood insurance policies providing $1.3 trillion in coverage.

Periodically, Congress must renew NFIP's statutory authority to operate.

In recent months, President Donald Trump said he'd like to dismantle FEMA -- and NFIP -- as part of a broader plan to reduce the government's size. Critics argue the program is unsustainable and ill-prepared for the escalating costs of climate disasters.

But opponents warn dissolving the program could drive down property prices and collapse the real estate market.

"While private insurers may fill some gaps, coverage could become less consistent, straining household finances and complicating mortgage markets," said First Street, a New York-based nonprofit research company in a recent report.

Last Oct. 1, NFIP lapsed after Congress failed to pass a stopgap funding bill and reauthorize the program. When the government reopened, Trump signed legislation that temporarily extended NFIP's authority.

In North Carolina, the rate for flood insurance, on average, is $1,187 per year through NFIP, according to the latest LendingTree data.

The National Association of Realtors estimates that another lapse would affect approximately 1,300 property sales each day -- roughly 40,000 closings per month.

A House-Senate appropriations deal released Thursday includes language to extend NFIP through Sept. 30. But it still needs to clear the full process.

Existing NFIP policies remain in effect until their expiration date.

NFIP's authorization has lapsed at least four times since 2018. Congress eventually restored the program over a cycle of short-term extensions.

NAR is now urging the longest extension possible while Congress continues working on a long-term reauthorization measure. They're also calling for regulatory reforms to expand private market options.

Separately, commissioner Causey joined Gov. Josh Stein on Nov. 14 in urging Congress to pass bipartisan legislation that would authorize NFIP to offer pre-collapse coverage so that coastal homeowners could demolish or relocate condemned structures before they fall into the ocean.

Since 2020, 27 oceanfront houses have collapsed into the ocean on North Carolina's Outer Banks, including 16 houses just since this September.

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