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Homebuyers frustrated with flood insurance lapses
July 19, 2010 - TAMPA - Local real estate professionals are hopeful Congress
will soon extend the National Flood Insurance Program for five years - a move
that could take some anxiety out of the home-buying process.
The program – the only way homeowners can obtain flood insurance - has
lapsed three times this year and is set to expire again in September. During
those lapses, many potential homebuyers in flood zones have been unable to
close on deals.
"It's infuriating to us that this continues," said Bonnie Davis, managing broker
for ReMax Metro in downtown St. Petersburg. "Congress flat out didn't do its
job."
The latest lapse came in June, as buyers rushed to close on homes in time to
take advantage of federal tax credits.
The tax credits were to lure buyers into the struggling real estate market. Real
estate agents say the credit worked, but thousands of buyers nationwide were
unable to close because they couldn't get flood insurance.
Mortgage companies require borrowers in flood zones to have flood insurance.
Without it, lenders won't fund the loan.
Davis said she had numerous buyers in that situation last month.
"You're talking about people with moving trucks and lives on hold," she said.
Even some homeowners who already have flood insurance have been affected.
Those with existing policies have been unable to renew policies during lapses in
the program.
The house last week approved legislation to extend the program through 2015.
The legislation also allows for some premium and deductible increases.
The flood program, an arm of the Federal Emergency Management Agency, has
for more than four decades offered affordable insurance to more than 20,000
communities that participate in flood damage reduction efforts and to residents
in federally designated flood zones. It was created in 1968 because of the
reluctance of private insurers to cover flood damage.
Congress has not updated the program since 1994. In the ensuing years the
once-solvent program had to pay out some $17 billion in Katrina-related claims
and had to deal with FEMA flood zone remapping that has thrust thousands of
homes and businesses into areas where they are required to buy flood
insurance.
The program now has some 5.6 million policies with an insured exposure of $1.2
trillion. The legislation now goes to the Senate, where its fate is uncertain.