The federal government shutdown has created a great deal of confusion about the federal flood insurance program among insurance professionals and their clients who are homeowners or are in the process of purchasing homes. Advisors may face questions from frustrated clients, and not all of the answers are clear at this point. Policies issued under the federal program remain in force during the shutdown, but the processing and payment of claims may be delayed, according to media reports. Pending applications and renewals are frozen until the government funding impasse ends. Flood insurance requirements for federally backed loans are suspended during the shutdown, according to FEMA and banking regulators.

According to the Federal Reserve Board: "Federal financial institution regulatory agencies today remind lenders that they may continue to make loans that are subject to the federal flood insurance statutes when the National Flood Insurance Program is not available. During this period, lenders are allowed to make these loans without requiring federal flood insurance.

"As explained in the Interagency Questions and Answers Regarding Flood Insurance, in Q&A Applicability 12, lenders may continue to make loans without flood insurance coverage during this time but must continue to make flood determinations; provide timely, complete, and accurate notices to borrowers; and comply with other applicable parts of the flood insurance regulations. In addition, lenders should evaluate safety and soundness and legal risks and should prudently manage those risks during the lapse period. The guidance also addresses the availability and use of private flood insurance."