President Signs Flood Insurance Extension

[Update 1: includes GSE actions] President Barack Obama today signed HR 5569, the “National Flood Insurance Program Extension Act of 2010,” into law. The law retroactively reauthorizes the Federal Emergency Management Agency (FEMA) to enter into new contracts for flood insurance under the National Flood Insurance Program (NFIP) through Sept. 30, 2010. It also reduces FEMA’s authority to borrow under the NFIP by $50m to up to $20.725bn, according to a White House statement. The Senate voted on the bill Wednesday in unanimous consent after the House of Representatives passed its own version last week. Robert Story Jr., chairman of the Mortgage Bankers Association (MBA) welcomed the legislation in a statement yesterday before it was signed into law. “More than five million Americans rely on the NFIP as their primary protection against flooding, the most common natural disaster in the United States,” he said. “The NFIP has expired three times in 2010, frustrating residential and commercial lenders and borrowers alike. We hope that Congress will use the next three months to develop and pass a long-term extension of the program.” The industry for months has urged an extension of the program Government-sponsored enterprise (GSE) Fannie Mae (FNM) said in April it would continue to purchase mortgage loans secured by properties in flood-prone areas, despite a lapse in the program. Freddie Mac (FRE) said in April it was extending mortgage relief to borrowers whose houses were affected by recent floods in Massachusetts, New Jersey, Rhode Island and West Virginia. The GSE gave its servicers discretion to reduce or suspend mortgage payments for up to 12 months for borrowers with Freddie-owned mortgages, although each case must be individually assessed to determine the appropriate alternative. Write to Diana Golobay.