UPDATE: Read NAR’s Oct. 10 letter to Craig Fugate outlining steps his agency could take to mitigate the sting of rising flood insurance premiums.
Any chance of the federal government delaying the phase-out of flood insurance subsidies coming down the pike rests entirely with Congress, because the Federal Emergency Management Agency (FEMA), which administers federal flood insurance, doesn’t have the authority to take action on the phase-out on its own, the agency’s head told lawmakers yesterday.
“Without some additional legislative support, I am bound and boxed in,” FEMA chief Craig Fugate said at a Senate Banking subcommittee hearing yesterday.
The subsidy phase out was enacted into law last year as part of major flood insurance reform legislation called the “Biggert-Waters Flood Insurance Reform Act,” which helped bring much-needed stability to the program by reauthorizing flood insurance for five years. But the law also instituted reforms to make the program more financially sound, and it’s part of that financial restructuring that Congress included the phase-out of insurance premium subsidies for a small portion of homes and businesses. As a result of the phase-out, some owners will see their share of flood insurance premiums go up starting next month, which is the start of the next federal fiscal year.
Although the number of impacted property owners is not large, for some of these owners, the increase could be significant, especially for those whose property is in a flood-prone area or an area that previously has not been designated a flood area but is now under new or newly updated flood-plain maps.
To slow down the pace of the subsidy phase-out, in part so FEMA can make sure it has the most accurate picture of flood risk in various areas, lawmakers, with NAR’s support, have introduced legislation in both the House and the Senate. The legislation has passed the House but not the Senate, and with the new fiscal year just around the corner, time is short for Congress to act.
Sen. Mary Landrieu (D-La.), who led the effort earlier this year in the Senate to get the phase-out delayed, testified at yesterday’s hearing that, separate from the burden on owners, the higher costs of flood insurance will make some homes hard if not impossible to sell. “Many of our folks are saying they can’t put their homes for sale,” she said. “They have no value.”
The other senator from Louisiana, David Vitter (R), asked FEMA to work with lawmakers by providing its own proposals for addressing the affordability issue that is poised to arise from the phase-out. “When will FEMA make any specific . . . proposals to address affordability?” he asked at the hearing.
Some lawmakers are looking to upcoming legislation to provide short-term funding for the federal government as a vehicle for getting the delay enacted. There will be clarity on whether that will happen or not in the weeks ahead.
In the meantime, NAR recommends agents, if they’re working with buyers or sellers of property in a flood area or an area that might be in a flood zone to let clients know that insurance subsidies could be phasing out, thereby increasing the costs to owners for flood insurance. NAR has developed model language agents can use to make that disclosure. Access that template and read about NAR’s recommendations.
In all, there are several categories of property facing a phase-out of premium subsidies, although not all of them would be included in any delay under the legislation pending in Congress. For some second homes and other properties, the phase-out will continue even if the legislation passes.
YOU DID IT! Late last week Congress finally acted on one of your key legislative priorities, a five-year reauthorization of the National Flood Insurance Program (NFIP). Even better news, we just received word that the president is expected to sign it into law tomorrow, Friday, July 6, 2012.
All the D.C. pundits said nothing would be accomplished in an election year! You just proved them wrong because you didn’t give up, and now you have the victory to confirm it!
The reason I’m writing this today is to reinforce the commitment of your National Association to you and every other member who expects us to persevere on issues of importance to our members and your clients – the consumers, homeowners, and potential home owners of the future.
NAR, with your help and influence, stayed the course to give lenders and home owners more certainty in the mortgage and real estate market place with available flood insurance for existing home owners and those buying and selling.
This has been a long, arduous battle. The National Flood Insurance Program suffered through over 18 short-term extensions and hobbled along for the last four years without a long-term reauthorization forthcoming from D.C.
It was your charge to us not to give up, not to accept anything less than a long-term reauthorization of the Flood Insurance Program. So, we battled to get every inch along those short-term extensions until now when a full five-year reauthorization has been approved.
This fight traveled over several administrations and more than a few presidents of NAR. I’m proud to represent them and the management team in this victory for you.
But, while I’m proud of my predecessors in leadership, and equally as proud of the most effective management team both in Chicago and D.C., I am especially proud of you!
When called upon to respond to our Calls to Action, you did. When asked to invest in your business, you have. And, when asked to step up and participate you resoundingly did that, too.
New battles lay ahead. There will be no easy victories. Now more than ever, it is our responsibility to be steadfast protectors of the American Dream of home ownership. If not us who? If not now when? So, when we call on you like we did to rally, when we call on you like we do to respond to the calls for action, please; continue to show your commitment.
God bless you all. You are what this country is all about! Rally on REALTOR® Party!
You truly are the heart of the deal… many thanks.
More at REALTOR.org: Congress Reauthorizes Flood Insurance for 5 Years