Green light for home buyers despite insurance gap
Homes are flooded on Horton Avenue in Riverhead, Wednesday afternoon. (March 31, 2010) Credit: James Carbone
Long Island home buyers who need flood insurance can rest a little easier - federal agencies said their closings can proceed despite a lapse in the National Flood Insurance Program.
Congress went on break without renewing the program, which lapsed March 28, but federal agencies this week advised lenders to proceed with loans that have proof of pending policies, such as a borrower's check for the insurance or the agent's receipt.
Lawmakers are expected to renew the program, which affects Long Island's coastal areas, when they return April 12.
"My biggest fear is I won't be able to close and Congress won't pass this thing and I'll be back to square one again, looking for another house," said George Amanatides, 46, a first-time buyer planning to close soon on a house in Long Beach.
The Federal Housing Administration said Thursday that it will continue insuring loans, but said lenders need borrowers' insurance applications and evidence of pending policies in the closing files.
Freddie Mac, the government-sponsored mortgage finance giant, sent lenders an update Tuesday saying that after the program is reauthorized lenders must confirm the policies went through.
The Federal Emergency Management Agency, which runs the insurance program, said policy holders' claims will be covered.
Amanatides said his attorney told him Tuesday he needs flood insurance. He is supposed to close about the time Congress returns from recess, which is also when his lender's loan commitment expires.
Mike McHugh, head of Continental Home Loans in Melville, said it usually takes one to two days to get flood insurance.
"It's going to put a little more burden on us to reverify that it was done correctly," he said. "It would be a disaster to have someone who thinks they have flood insurance and it did not get processed properly."
