Changes to the National Flood Insurance Program (NFIP) that would cause flood insurance premiums to increase drastically for some properties are already impacting the sale of homes. Real estate professionals and bankers say there are many similar situations on the way. They contend that changes required by Congress in 2012 when it granted a five-year extension to the flood insurance program — intended to ensure premiums reflect the true risk of being in an area susceptible to flooding — are going to disrupt the real estate market and lead to more foreclosures. The real estate and banking industries are urging Congress to force the Federal Emergency Management Agency (FEMA), which determines flood insurance rates, to hold off on the phase-in of higher premiums until an affordability study is done to show the economic impact. But others, including the insurance industry and FEMA, say it’s time to stop subsidizing premiums on flood-prone properties that file the kind of large claims — sometimes repeatedly — that have left the NFIP in the red. Among the changes mandated in the new law, according to FEMA: Owners of non-primary residences in what’s called Special Flood Hazard Areas will see 25% increases annually until rates reflect the true risk. Starting this month, subsidized policies on property that has experienced severe or repeated flooding also will receive 25% annual hikes in premium. Primary residences in flood hazard areas will be able to keep their current low rates until the property is sold, the policy lapses, it suffers severe or repeated flood losses, or a new policy is purchased, FEMA says.
Source: Milwaukee Journal Sentinal; 10/5/2013