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ALEXANDRIA, Va. and WASHINGTON-NCUA issued a Regulatory Alert (02-RA-14) recently to aid credit unions and their members in handling the lapse in federal flood insurance authority that began Jan. 1. According to the guidance, federally-insured credit unions may continue to extend loans without being cited for federal flood insurance regulation violations during the lapse. However, regulated institutions must continue flood determinations; give borrowers timely, complete and accurate notices; comply with other parts of the flood insurance regs; and evaluate and manage safety and soundness risks during the down time. NCUA recommended credit unions establish a system to ensure policies are obtained as soon as they become available for properties subject to mandatory flood insurance coverage. While the 107th Congress adjourned without reauthorizing the Federal Emergency Management Agency’s National Flood Insurance Program for 2003, legislation is expected to pass shortly after the new Congress convenes, which should be retroactive to the first of the year. NAFCU Legislative and Political Affairs Director Brad Thaler predicted that a flood insurance reauthorization bill could be introduced as early as Jan. 7, the day lawmakers return to Capitol Hill. Financial Services Chairman Mike Oxley (R-Ohio) and Ranking Member Barney Frank (D-Mass.) have said they will author the bill. At the latest, Thaler said the uncontroversial bill should sail through Congress in the first week or two after Congress reconvenes. NAFCU wrote the congressmen, as well as the leaders of the Senate Banking Committee, raising the organizations’ concerns and thanking the legislators for their efforts in the area. “NAFCU is particularly concerned that this disruption will negatively impact credit union members who need to renew policies in early January, in addition to those who must purchase flood insurance as a condition for obtaining mortgages from federally regulated lenders,” the letter read. “Nevertheless,” NCUA’s Regulatory Alert reads, “there are no guarantees that Congress will reauthorize the NFIP, or that reauthorization will be given retroactive effect. This regulatory alert contains informal guidance on issues that may arise during this period of lapsed authorization for lenders and borrowers concerning loans that are or will be secured by property located in a [Special Flood Hazard Area].” The Federal Insurance and Mitigation Administration, administrator of the NFIP, will work to provide interested parties up-to-date information during the lapse.

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