It was hard to miss the fluke timing: As the Northeast got soaked with record rainfall, the nation’s major flood insurance outlet went on hiatus, bringing new policies and renewals to a screeching halt and an added hitch to real estate transactions.

The National Flood Insurance Program, which insures most flood policies in the U.S., was due for renewal at the end of March. But Congress recessed March 26 without renewing the program – meaning it will be frozen at least until lawmakers come back on April 12.

“This is definitely a potential problem for a lot of people,” said Rebecca Scaglione, vice president and mortgage loan officer with Pentucket Bank in Haverhill. “It will muddy up the waters and it will be an issue” for lenders and borrowers alike, she said, depending how long it takes for lawmakers to renew the program after they return.

Despite the hiatus, home and business owners with current policies are covered; insurance companies that pay out claims for the program will continue to do so. But no new policies or renewals can be submitted until the program comes back online again. What’s more, to get a loan – a mortgage, refinance or line of home equity – on a home in a FEMA-designated floodplain zone, the borrower must have flood insurance in almost all cases.

Private flood insurance is often prohibitively expensive, so many owners opt for the federal program, which has a payout ceiling of $250,000.

Scaglione said Pentucket has no loans in the pipeline that are likely to be slowed by the program’s lapse, but borrowers with impending closing dates are likely to encounter delays, or worse, unless they have already shored up their flood insurance. Depending on the lender’s contract language, some borrowers might lose their deposits if the lapse delays them too long.

Not Easily Ignored

This is not the first time the FFIP has been frozen. It was suspended for five days on Feb. 28, after Sen. Jim Bunning (R-Kentucky) refused to join colleagues in renewing a package that included the FFIP, saying the government had no way to pay for all the provisions included.

He eventually relented, and the package was renewed. Bunning’s main contention wasn’t the flood insurance program as much as other portions of the bill, including COBRA health insurance and unemployment benefits. Those major national issues have grabbed more attention.

But the flood program isn’t as easily ignored for many insurance agents, lenders and borrowers.

Larry Cowen, president of Haverhill’s Cowen Insurance Agency, said he recently put together a flood insurance quote for a potential customer set to close on a home loan on April 10. The customer didn’t end up going through Cowen, but he said he now has no idea if the potential customer’s loan will even go through.

For people who need to get flood insurance in the next two weeks, “you’re screwed,” Cowen said.

Delays And Denials

While many people get flood insurance long before they need it, either to renew their policies or have a loan go through, plenty of people wait until the last minute.

Debbie Sullivan, personal lines manager for The Driscoll Agency in Norwell, said a number of waterlogged residents have called the agency to see if they can buy new flood policies on their homes. Without the program in place, the agency can’t even get the process started.

Applicants who aren’t getting insurance as part of a loan process have a 30-day waiting period, anyway, but now those customers are going to have to hang on even longer.

“It’s frustrating to know that we can’t sell these policies,” Sullivan said.

As for current flood customers, the Driscoll agency has two renewals that can’t go through until Congress renews the NFIP, and those customers are just going to have to sit tight for awhile, she said.

The flood insurance program has a history of problems, including a fight over whether wind coverage should be added to the program. In addition, Hurricane Katrina in 2005 put the program deeply in the red, giving the U.S. government a debt load will likely never repay under current conditions, according to Dan Corbin, director of research for trade group Professional Insurance Agents. Lawmakers have given short-term renewals to FFIP repeatedly for the past few years, but haven’t gotten around to tackling longer-term problems.

Still, frustrations aside, the program will likely be fully reinstated as soon as Congress returns from the Easter break, he said. Corbin also recommended that people contact their representatives and create a stir about the interruption.

“Hopefully this will be nothing more than an inconvenience,” Corbin said.