What is the fundamental issue?
For home buyers and owners to obtain a mortgage on a home that is located in a 100-year floodplain, the mortgage companies require Flood Insurance. In an effort to make that insurance affordable and keep houses selling Congress created the National Flood Insurance Program (NFIP) to write affordable flood insurance policies. This Program is set to expire May 31, 2012. It has been running on an extension since 2011.
As a Real Estate Professional, what does this mean for you?
NFIP allows 5.6 million home- and business owners in 21,000 communities nationwide to obtain a mortgage or insurance to protect their properties against flooding, which is a common and one of the most costly of natural disasters in the US. The NFIP was created because of the lack of flood insurance available in the open market. Most of our regular insurance companies do not offer or offer at too costly a price. Without the insurance, a much larger number of uninsured properties would never be rebuilt after a natural disaster of a major flood.
- Renewing the NFIP to make sure we have this program to keep the very fragile housing market recovery on track.
- Making a much bolder step than a temporary stop gap measure.
- National Association of Realtor’s (NAR) also supports:
- Maintaining funding to update and improve the accuracy of flood maps, which are used to determine which properties require flood insurance; and
- Including comprehensive coverage for properties including non-primary residences and reforms to ensure “full risk” premiums for properties with repetitive insured losses.
The NFIP’s authority to provide insurance while our legislators debate over fiscal reforms has been on shaky ground since 2008 when the program was up for renewal. Congress has approved several stop gap extensions to keep it limping along and it was even allowed to expire twice for several weeks each time. During the las expiration in June 2012, NAR reports that 47,000 home sales were delayed or cancelled. According to data from NAR more than 1,300 home sales are affected each day nationally if NFIP were to lapse again. The last stop gap is set to expire on May 31, 2012.
The last extension that was a part of H.R. 2055, a large bill combining nine government spending bills. Today MAREI and several Real Estate Related Associations across the country urge Congress to take the next step and adopt a comprehensive reform to ensure the program will be available over the long term.
MAREI is urging Congress to complete work on the 5-year NFIP reform bill before the latest extension expires, to provide certainty and avoid further disruption to real estate markets.
- ‘Flood the Hill’ Effort Sees Insurer Groups, Others Team Up for NFIP Extension, May 1, 2012
- Letter from Washington: Flood the Hill , May 1st, 2012
- Background: National Flood Insurance Program (NFIP)
- Realtors® Urge Long-term Flood Insurance Reform
- The Cost of Flooding, (FloodSmart.gov, n.d.).
- Buying Flood Insurance, (About.com, 2011).
- 7 Flood Insurance Myths, (HouseLogic.com, Mar. 23, 2011).
- Do You Need Disaster Insurance?, (smartmoney.com, Mar. 15, 2011).
- Do You Need Flood Insurance?, (gettingmoneywise.com, Jan. 24, 2011).
- Myths and Facts About the National Flood Insurance Program, (FEMA, Oct. 13, 2011).