Homebuyers in Connecticut, and across the nation, can feel more optimistic about the progress of their real estate transactions. The National Flood Insurance Program (NFIP) has been reauthorized—for now. http://www.examiner.com/x-10548-Hartford-Special-Interests-Examiner~y2010m4d17-Another-hurdle-in-the-real-estate-market
Congressional leaders have finally taken action on the NFIP, providing a short extension of the program. In a move that received no fanfare, the Federal Emergency Management Agency (FEMA) informed administrators and carriers of this insurance of the extension in a brief letter. The entire text of the letter reads, “On April 16, 2010, Congress passed and the President signed H.R. 4851, which extends the NFIP through May 31, 2010. The extension was retroactive to February 28, 2010.” http://bsa.nfipstat.com/wyobull/w-10044.pdf
There still are no updates posted on the FEMA website, but evidence that the program is back in effect is apparent as real estate transactions that had been placed on hold are, at last, seeing forward progress.
Connecticut homebuyer Caleb Boone says, “It is a huge relief that this is no longer going to hold up my purchase of a new home for my family in Middletown. I’m just glad that we have gotten a green light, and will be able to get this done before the program lapses again.”
According to InsuranceNewsNet.com, “Democrats and Republicans in the Senate disagree on funding for the program. Democrats insist the money come out of emergency spending, which would add it to the national debt, while Republicans demand the cost be budgeted and offset. Political philosophy aside, the dissension could have a potentially damaging impact on the local housing market.” http://insurancenewsnet.com/article.aspx?id=180775
The December 2007 report issued by the non-partisan U.S. Government Accountability Office (GAO) recommended several changes for Congress and the Administration to make to the NFIP. http://www.gao.gov/new.items/d0828.pdf
Reauthorization is an excellent opportunity to make any such changes. The InsuranceNewsNet.com article goes on to say that, “The situation has prompted calls for a more long-term solution, be it extending the NFIP on an annual basis or re-drafting the legislation all together.”
However, there are no signs that this will be the tack taken by Congress.
A posting on the Connecticut Real Estate Investor’s Association’s website states, “The NFIP has become a political football because House Democrats want to add wind damage coverage to the program as well as reduce the ability of insurance companies to limit their obligation to cover hurricane claims by citing a flood damage exemption.” http://www.ctreia.com/news.php?a=v&i=44
The National Association of Realtors has estimated that for each one-day lapse in the NFIP there are 1,400 real estate transactions which are adversely impacted. “By law, flood insurance is required for the purchase of real estate in a 100-year floodplain. The lapse in flood insurance [has] resulted in many delayed, and even cancelled, transactions.” www.realtor.org
All of this, just weeks after FEMA had damage assessment teams in Connecticut following severe flooding. http://www.ct.gov/governorrell/cwp/view.asp?A=3872&Q=458306
The temporary reprieve that the federal government has granted to the NFIP should not lead us to believe any of these problems have been resolved.