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Flood Insurance and YOU

flood homes from FEMA

The following article comes from NAR, National Association of Realtors. Flood Insurance policies are a serious issue since they affect Sellers and Buyers. Plus, the FEMA flood boundaries can change. Buyers and their Realtor need to perform due diligence concerning the requirement of flood insurance policy. I recommend all my clients to call their insurance company regarding the cost of insurance(s). I also recommend the same due diligence if you buy land near coastline.

The National Flood Insurance Program (NFIP) is set to expire on September 30th, 2017. This is the federal program that subsidizes flood insurance, which allows people to continue to live in flood zones. There has been a movement in the federal governm

ent to retreat from providing this subsidy and allowing the market to determine what kind of premiums people pay for flood insurance. In fact, a bill was even passed to do just that—until the chaos it unleashed caused Congress to immediately reverse it.

For example, Oregon First had a transaction involving a modest home on the Clackamas River. When the subsidy went away in the middle of the transaction, it caused the cost of flood insurance to spike to $26,000 a year! Obviously, this essentially made the house unsellable. Multiply that by hundreds of thousands (perhaps millions) of homes across the country and you get the idea why the problem is not easily solved.

Hearings are currently being held in Washington on the NFIP and what to do about it. Below is a link to a letter from NAR to the members of the House Financial Services Committee, who are in charge of this program.

NAR’s Position, Recent Flood Insurance Hearings

More Details & Resources from the Oregon Association of Realtors®:

On July 6, 2012, Congress passed the Biggert-Waters Act reauthorizing the NFIP through 2017. While ending the shut downs and short extensions that cost 40,000 home sales each month, implementation problems threatened to undermine real estate transactions where flood insurance is required for a federally related mortgage.

On March 13, 2014, Congress responded by amending Biggert-Waters with the passage of the “Homeowner Flood Insurance Affordability Act.” President Obama signed these amendments into law on March 21, 2014:

  • Repealed FEMA’s authority to raise premium rates at the time of property sale;

  • Restored grandfathering so properties built to code in one flood zone wouldn’t be re-rated in another simply because of a FEMA map change;

  • Reset flood insurance rates one time back to pre-Biggert Waters levels and refunded overcharges;

  • Limited future premium increases to 18% annually for newer properties and 25% for the older ones;

  • Added a $25/$250 surcharge to NFIP policies until property owners begin paying full-risk rates; and

  • Established the Office of the Flood Insurance Advocate to help property owners with faulty flood maps and/or insurance rate quote concerns.

The NFIP is again up for renewal on September 30, 2017. The last Congress began the process of drafting the next reauthorization package by holding hearings and acting on several reform bills that could be considered for inclusion, such as:

  • H.R. 2901, “The Flood Insurance Market Parity and Modernization Act” to encourage the development of a private market that offers comparable flood insurance coverage at lower cost than the NFIP.

  • On April 28, 2016, the House of Representatives passed this bill by an overwhelming bipartisan vote of 419-0.

  • The Senate did not act on the measure before the end of the session.

  • H.R. 2029, “The Consolidated Appropriations Act of 2016” to fund NFIP flood mapping ($190 million), property mitigation grants ($175 million), and the Office of the Flood Insurance Advocate ($5 million).

  • Enacted into law on December 18, 2015.

  • H.R. 3297, “The Fairness in Flood Insurance Act” to streamline the flood mapping process and reimburse property owners when they appeal and win.

  • Introduced July 29, 2015 but was not taken up in the 114th Congress.

  • The 115th Congress is expected to move quickly toward reauthorization, with the House likely to consider legislation first. NAR will continue to urge swift action and work with Congress to fully reauthorize and reform the NFIP before the current authority expires on September 30, 2017.

NAR Resources

On July 6, 2012, the President signed into law “The Biggert-Waters Flood Insurance Reform Act of 2012” which extends the National Flood Insurance Program (NFIP) for five years and includes many program reforms. NAR created a NFIP Resources Page, which includes links to detailed information on the NFIP to help answer REALTOR® questions about the changes coming to the NFIP. Resource page includes:

  • Webinars on Flood Insurance Rates

  • NAR Legal Guidance and Political Advocacy information

  • FEMA Resources

  • Videos from NAR and FEMA

  • Statistics from FEMA

  • Interactive Maps

Link to NFIP Resource Page (National Flood Isurnace Program)

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