Bailout unlikely for flood insurance program

From the Insurance Journal:

Prospects Dim for Bills to Delay Flood Insurance Rate Hikes

Efforts to delay implementation of changes in the federal flood insurance program have run into roadblocks on both sides of Capitol Hill.

The leaders of the House Financial Services Committee say they are standing behind last year’s bipartisan legislation to put the flood insurance program on sounder financial footing even as the implementation of the law has sparked a chorus of complaints from constituents fearing spikes in premiums and plummeting home values.

In the Senate, attempts to call a quick floor vote on legislation to delay the changes in the program — designed to force higher premiums on properties especially at risk of flooding — appear to face opposition from both Democrats and Republicans.

Sen. Mary Landrieu, D-La., wants to add the measure to an unrelated defense policy bill, but Majority Leader Harry Reid, D-Nev., is restricting the ability of senators to offer unrelated amendments. Meanwhile, Republicans are unlikely to allow a vote that could give Landrieu, who faces a tough re-election bid next year, the chance to claim political credit.

The curbs on taxpayer-subsidized flood insurance rates are a case study in what happens when Washington takes away a government-sponsored benefit that helps a relatively small group of people.

About 1.1 million homeowners — or 1 in 5 in the program — have received taxpayer-subsidized rates and the government has financed about 60 percent of losses on their properties. Most people can retain the subsidies but can’t pass them along to people buying their home, a restriction that’s especially burdensome to lower-income older homeowners seeking to sell their houses.

The changes also promise to make it unaffordable for people in chronic flood zones to keep their homes, and they have put a damper on home sales in areas where benefits extended to current homeowners can’t be passed along to prospective buyers.

The quandary is especially felt by conservative Republicans torn between their philosophy of limited government and helping constituents facing sharply higher flood insurance premiums. Lawmakers trying to delay the law’s implementation cite horror stories of people slapped with unaffordable premium increases on modestly priced homes.

Supporters of the law say it’s mostly operating as intended, which is to hit at-risk homeowners with actuarially sound rate increases.

“What we’re trying to do is separate fact from fiction here. And we’re hearing a lot of rumors. And some of those rumors … it turns out are not as represented,” said Rep. Randy Neugebauer, R-Texas, who chaired a hearing Tuesday of the Financial Services Committee’s housing and insurance subcommittee. “We do know that there are some people out there who are going to experience higher premiums. But, you know, that was the purpose.”

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10 Responses to Bailout unlikely for flood insurance program

  1. grim says:

    Surprised that Biggert Waters didn’t include mandatory provisions that allowed for unconditional buyouts by local, state, or federal authorities if the properties fell into the severe repetitive loss category – a teardown is more cost effective than rebuilding or continued insurance.

  2. grim says:

    Bystander says:
    November 29, 2013 at 12:56 pm
    Grim/30 yr,

    I asked this before- what about the Biggert Waters act went into effect Oct. 1st? Busoness as usual. No future impact on region? Are people buying without the thpight that premiums could go from 400/yr. to 7k? All these PRP/pre-firm designations will not help upon title change or renewal. Why is this hush, hush? I just pulled out of a deal bc of it. Are people just ignorant to it?

    Much ado about nothing?

    http://www.fema.gov/media-library-data/20130726-1910-25045-4019/bw12_impact_fs_04092013_natl_508.pdf

    Looks like only 5% of NFIP properties are subject to the increases, and they are business, non-primary residences (rentals), and severe repetitive loss properties.

    Another 10% represent the pre-FIRM that don’t fall into the above bucket.

    81% are already paying actuarial rates.

    For the folks that invest the money required to elevate, I suspect that they’ll find break even, or even positive payback, associated with the work.

  3. grim says:

    Easy solution, require everyone in America to have flood insurance, Obamaprotect!

  4. Bystander says:

    I think you will find that a disproportionate number of those affected will be in coastal cities. My father lives on a river in River Vale and his flood premium doubled from 1,300 to 2,600 in one year. This is his primary residence. He had one claim in 20 years and this was just before Bigger Waters went into law. Will let you know when he renews.

  5. grim says:

    Was under the impression that Florida was the largest beneficiary of the subsidies.

  6. anon (the good one) says:

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  7. 30 year realtor says:

    Impact of flood insurance on a sale? Currently have a home listed for $299,000 in Bergenfield. Flood insurance costs $150 per month for $5000 deductible and $200 per month for $1000 deductible. Currently a mortgage costs about $5 per $1000 borrowed on a 30 year mortgage. A buyer can buy the home in the flood zone or buy another home outside the flood zone and spend $30,000 – $40,000 more and have the same payment.

    The home directly next door to my listing is under contract and outside the flood zone. Smaller home and not as updated as the subject with an asking price of $281,000.

    Looks as though my seller is going to need to adjust his price before a buyer is prepared to pay the cost of flood insurance and a mortgage for his castle.

  8. Fast Eddie says:

    Well maintained? Why is the house empty? You want how much for this? Oh, it has the proverbial granite counters? How come we can’t see a picture of the kitchen? Meticulously landscaped? Really? How come the taxes aren’t listed? Exceptional value? By what measure?

    http://www.trulia.com/property/1093357583-116-Schuyler-Rd-Allendale-NJ-07401#photo-1

  9. The Original NJ ExPat, cusp of doom says:

    We can all buy it on open exchanges on the new state of the art portal, floodcare.gov

    Easy solution, require everyone in America to have flood insurance, Obamaprotect!

  10. Why not have everybody in Amerika buy flood insurance? By the figgering of the moron-in-charge, my 88 y/o mom needs a prenatal program.

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