NAR Sounds Alarm on Upcoming Flood Insurance Expiration

Real Estate In-Depth | March 2017

WASHINGTON—The National Association of Realtors is urging Realtors as well as consumers to the pending expiration of the National Flood Insurance Program on Sept. 30. NAR officials warn that a possible program expiration would harm consumers and threaten the health of the residential real estate market.

While NAR is working closely with federal regulators and members of Congress to strengthen the program and clear the way for a private market to take hold, NAR President William E. Brown, a second-generation Realtor from Alamo, CA and founder of Investment Properties, believes that a Sept. 30th expiration would deal significant damage to current policy-holding property owners, as well as threaten property sales and the broader housing market.

JoAnne Murray, president of Allan M. Block Agency of Tarrytown, tells Real Estate In-Depth that flood insurance is a very important issue. “Flood insurance has been a political football for years. The last time the authorization ran out, it took 17 short term extensions, four lapses and nearly four years before the program was reauthorized in 2012. It was a nightmare for people trying to buy homes,” she said.

Murray in looking forward notes, “I think Congress understands the importance of the program and has been working to implement changes that benefits everyone. But, you never know. If that football goes out of bounds and there is no one to bring it back on the field, it’s anyone’s guess what could happen.”

NAR’s Brown said that Realtors see the NFIP’s importance every day in their lives and in their business and made the following statement:

“When the NFIP expired in 2010, over 1,300 home sales were disrupted every day as a result. That’s over 40,000 every month. Flood insurance is required for a mortgage in the 100-year floodplain, but without access to the NFIP, buyers simply couldn’t get a mortgage or vital protection from the No. 1 cause of loss of property and life: flooding.”

He added, “This problem affects far more than coastal communities, and prospective homeowners aren’t the only ones at risk. Policyholders in over 22,000 communities across the country depend on the NFIP to protect homes and businesses from torrential rain, swollen rivers and lakes, snowmelt, failing infrastructure, as well as storm surges and hurricanes. When that lifeline is cut off, the NFIP can’t issue new policies or renew existing residential or commercial policies that expire. That means current home and business owners may find their most important asset unprotected.

Brown noted that 2016 was the third largest claims payout year in NFIP’s history, costing more than $4 billion. While there were five $1-billion floods, including Hurricane Matthew, four of the five were inland. He added that the largest single event was in Baton Rouge, LA in August.

“The NFIP isn’t perfect, and reforms are needed. We will continue working closely with everyone involved to achieve those reforms. Good work has been done in Congress, at FEMA and elsewhere to clear the way for those efforts,” Brown said. “We thank leaders on both sides of the aisle for all they’ve done up to this point. Now, it’s time for action. Congress has six months to do the right thing and pass a long-term reauthorization of the program. We’re hoping they do just that.”

In a Jan. 23rd letter authored by NAR President Brown to U.S. Reps. Jeb Hensarling, chairman of the House Financial Services Committee, and Maxine Waters, ranking member of the House Financial Services Committee, NAR released a number of principles to increase access and affordability to the flood insurance program for consumers.

• Reauthorization of the NFIP, flood mapping and mitigation. According to NAR research, the NFIP was essential to successfully completing half a million home sales in 2015.

• Inclusion of the Flood Insurance Market Modernization and Parity Act, as unanimously passed by the House 419-0 last Congress (H.R. 2901 by Reps. Ross [R-FL] and Murphy [D-FL]).

• Providing more flexibility with mitigation assistance and adjusting the increased cost of compliance provisions to enable policyholders to mitigate risk before the property floods.

• Directing the technical mapping advisory group to develop state flood mapping programs like North Carolina’s that use Light Detection and Ranging (LiDAR) technology to improve granularity at lower cost than FEMA’s flood maps.

• Aligning the NFIP’s rate setting parameters with those of the private market. According to independent actuarial research conducted for NAR, having more than one risk rate table would enable the program to charge rates closer to the risk for many properties now overpaying into the program.