Realtors hailed a bill introduced recently by members of Congress that would delay flood insurance rate increases, which became effective Oct. 1.
The legislation postpones federally mandated flood insurance rate increases stalled because of the government shutdown. The new rate increases alarmed many homeowners, who saw their flood insurance rates rise.
National Association of Realtors officials reported that the bipartisan support could help millions of homeowners who facing sudden and in some cases extreme increases in flood insurance premiums, an unintended consequence of legislation to reform the National Flood Insurance Program (NFIP).
The NFIP was originally created in 1968 because private insurance companies refused to provide flood insurance, as the payouts were too large to be profitable. The NFIP is now more than $20 billion in debt to the U.S. Treasury, largely because of claims from Hurricane Katrina, which destroyed much of Louisiana and the surrounding area, and Hurricane Sandy, which caused severe flooding and widespread damage on the northeastern coast of the country.
Last year Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12), which reauthorized the NFIP but also made major changes to the insurance premiums many homeowners would pay, including the phase-out of some federal subsidies. When it took effect Oct. 1, homeowners in some of the hardest-hit areas saw their flood insurance premiums increase from $1,000 per year to as much as $10,000 or more per year.
The new bill delays further implementation of some rate increases in BW-12, allowing the Federal Emergency Management Agency to complete an affordability study mandated by BW-12, propose targeted regulations to address any affordability problems found in the study and give Congress adequate time to review those regulations.
Flood insurance is required to secure a mortgage in many cities in the Bay Area. When homeowners cannot obtain flood insurance, sales of homes are stalled, said Carolyn Miller, president of the Silicon Valley Association of Realtors.
“The five-year reauthorization of the NFIP will ensure that buyers will be able to obtain the flood insurance required to obtain a mortgage, and the new legislation that delays the flood insurance rate increases will ensure that all homes pay a rate that fairly reflects their risk of flooding,” she said.