NU Online News Service, March 2, 1:23 p.m.EST

WASHINGTON–Congress' inability to renew the NationalFlood Insurance Program has potentially dire consequences, Federalflood agency management officials warned.

The NFIP was allowed to expire Sunday when a congressionalappropriations bill that included the program was held up by Sen.Jim Bunning, R-Kentucky.

According to a memo written by officials of the FederalInsurance and Mitigation Administration/Risk Insurance Division, ofthe Federal Emergency Management Agency, the interruption of theflood program means claims cannot be paid while it remains inlegislative limbo.

A copy of the memo was obtained by NationalUnderwriter. FEMA is part of the federal Department ofHomeland Security.

According to the memo, home mortgage lenders will not be able tomake loans or complete mortgage closings in areas that requireflood insurance, specifically, "mortgage transactions on propertieslocated in flood zones will stop," the memo said.

A complete reauthorization of NFIP authorization has been amatter of debate since 2008. The program has been given limitedextensions through various acts of Congress four times.

The latest proposed extension would have run the program untilMarch 28, but legislation to continue it has been blocked becauseit was part of a measure that included jobs creation money thatdrew objections from Sen. Bunning; the senator has objected on thegrounds that funding for the bill has not been delineated.

Today the senator again blocked efforts to get the temporaryextension through.

Sen. Harry Reid, D-Nev., Senate majority leader, now plans toinclude the NFIP reauthorization in a larger jobs bill expected tobe on the Senate floor this week.

In the latest comment, Jimi Grande, senior vice president offederal and political affairs at the National Association of MutualInsurance Companies, called the current situation"disconcerting."

He said Sen. Bunning's ability to stop temporary extensions, "Ifnothing else, should make it clear that short-term extensions,which can be blocked by any Senator or congressional caucus, areuntenable."

Mr. Grande added that, "Members of Congress have exposedmillions of Americans to costly liabilities by allowing the programto lapse again."

"Providing protection from flood losses should be more of apriority for the government," he explained.

"After one of the stormiest winters on record, and withhurricane season fast approaching, it is unfortunate that Congresswould fail to act on this issue and put millions of Americans'financial security at risk," he said.

According to the FEMA memo, lapse of NFIP authorization isplacing a "hardship on citizens seeking mortgage loans orrefinancing that require flood insurance as a precondition tosettlement."

Moreover, the memo said, "capital otherwise available fromfederally regulated institutions will contract."

"The lending and real estate industries and insurance companieswriting insurance would suffer significant disruption, as wouldFannie Mae and Freddie Mac," the memo added.

FEMA sought to reassure the home lending industry through itsmemo that it "continues to work with the insurance, lending,homebuilding and real estate communities to mitigate theconsequences of a hiatus in NFIP authority.

"However, failure to reauthorize the NFIP quickly will affectthose industries and cause unnecessary delays in selling property,closing mortgage loans, and entering into contracts for propertyinsurance," the memo added.