OPTIONS DURING FLOOD INSURANCE HIATUS
Options during flood insurance hiatus
Should a buyer not secure flood insurance on time, closing is still possible if the buyer “assumes” the seller’s existing flood insurance policy. For this to work, the seller must have coverage and be willing to transfer it. More info: http://www.fema.gov/pdf/nfip/manual201005/03gr.pdf
In addition, a handful of private companies also offer flood insurance not backed by NFIP, such as Lloyd's of London, Chubb and AIG. However, these companies issue only a limited number of policies and, without federal backing, it can be expensive.
Secondary lenders that purchase mortgages have their own guidelines on how to handle a flood insurance lapse. FHA has already issued updated guidance. Fannie Mae, Freddie Mac, the VA and other lending authorities are expected to release guidance shortly.
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