The Federal Emergency Management Agency reversed course late Friday and said it would allow sales of new flood insurance policies during the partial government shutdown.

“As of this evening, all [National Flood Insurance Program] insurers have been directed to resume normal operations immediately and advised that the program will be considered operational since December 21, 2018 without interruption,” FEMA said in a press release.

Republican lawmakers, including House Majority Whip Steve Scalise and Sen. Bill Cassidy — both from Louisiana — and Sen. Marco Rubio of Florida had weighed in with the administration to get FEMA to reverse its policy, initially announced Wednesday. At the time, FEMA said the lapse in appropriations meant the agency couldn’t pay the private property and casualty insurers known as “Write Your Own,” or WYO companies, which write federal flood insurance policies with government backing.

Scalise and Rubio had each contacted the Office of Management and Budget to get it to overrule FEMA’s earlier guidance. In a statement late Friday, Scalise took credit for securing the reversal. “I’m glad after speaking with OMB and FEMA yesterday that they have decided to reverse course and allow flood insurance policies to continue as usual,” Scalise said.

In a Dec. 27 letter to FEMA Administrator Brock Long, Cassidy asked that the National Flood Insurance Program be exempted from the Antideficiency Act, which prevents federal agencies from spending money in the absence of appropriations.

Cassidy noted that Congress had reauthorized the flood insurance program through May 31, 2019, “for the precise reason of avoiding market interruption.” Trump signed the legislation into law on Dec. 21, before the partial government shutdown started.

Action is needed, Cassidy wrote, because the National Association of Realtors estimated that the inability to sell new flood insurance policies would affect 1,400 home closings each day.

Before the decision was reversed, Shannon McGahn, NAR’s senior vice president of government affairs, said Wednesday that the association and its members were “extremely disappointed by this abrupt and ill-conceived” decision because FEMA had allowed sales to continue during previous shutdowns.

“Today’s surprise FEMA ruling jeopardizes tens of thousands of home sales across America, as NAR estimates up to 40,000 closings are disrupted each month that the NFIP cannot issue flood insurance policies,” McGahn said in a statement Wednesday. She said that according to past precedent, including the 16-day partial shutdown in October 2013, the program should continue to write new policies.

‘Write Your Own’ ending

FEMA had said in a statement to CQ earlier Friday that the flood insurance program is still paying claims, despite the shutdown. But property and casualty insurers participating in the agency’s “Write Your Own” program wouldn’t get paid, the agency had said.

“FEMA advised Write Your Own (WYO) companies that the sale of new insurance policies and renewal of lapsing policies may be affected because of the lapse in appropriation. This is because the WYO [companies] are entitled to a fee from the sale or renewal of flood insurance policies and such a fee may be considered an impermissible funding obligation during a lapse of annual appropriations,” FEMA said in the statement. “In light of this requirement . . . NFIP sent a message to its industry partners providing guidance to suspend sales operations as a result of the current lapse.”

Policyholders would have a 30-day grace period from “the end of the specific policy’s term” to renew their policies, and policies are still effective in the meantime, FEMA said.

FEMA also said it was working to “determine what options exist to enable the NFIP to allow the sale and renewal of flood insurance policies to continue” as well as “reviewing all legal authorities with the Administration that would allow the NFIP to continue operations without interruption, so as to hopefully minimize impacts to policyholders and insurance industry partners during this funding lapse.”

Cassidy argued in his letter that the flood insurance program doesn’t rely on appropriations to underwrite policies or pay claims; that money comes instead from fees and premiums paid by policyholders. Therefore, it shouldn’t be considered a violation of the appropriations lapse to finance the sale of new polices, he wrote.

In addition, Cassidy wrote that the precedent FEMA applied in its guidance — a 2002 Justice Department legal opinion regarding the impact of a government shutdown on the Government National Mortgage Association, or Ginnie Mae, operations — shouldn’t apply to this situation.

“Based on this precedent, FEMA’s legal counsel has determined that a short-term interruption in the sale of flood insurance policies does not rise to the level of an immediate and significant market disruption that would support application of a narrow exception to the Antideficiency Act involving the safety of property,” Cassidy wrote. “This opinion does not make sense and runs counter to the 2002 Ginnie Mae operation precedent where Ginnie Mae employees continued essential business operations under an emergency exception.”

Bipartisan opposition

Senior House Democrats also disagreed with FEMA’s earlier interpretation that would block sales of flood insurance policies during the shutdown.

House Energy and Commerce Committee ranking member Frank Pallone Jr. and Rep. Bill Pascrell Jr., both New Jersey Democrats, wrote to FEMA Thursday urging them to reverse their flood insurance guidance. They said the agency’s “decision to prevent new policies from being issued will create problems for the real estate market across the country.”

And on Wednesday, House Financial Services Committee ranking member Maxine Waters, D-Calif., said in a statement that FEMA’s guidance ran counter to Congress’ intent.

“I urge FEMA to immediately reconsider this harmful and incorrect interpretation of its authority and resume its important work of providing flood insurance to families across the country,” said Waters, the prospective Financial Services chairwoman in the 116th Congress. That panel has jurisdiction over the flood insurance program.

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Niels Lesniewski contributed to this report.