Homebuyers frustrated with flood insurance lapses

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 recently 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 goes to the Senate, where its fate is uncertain.

Source: Tampa Tribune, Fla. Distributed by McClatchy-Tribune Information Services.