The National Association of Realtors released an opinion Tuesday regarding the National Flood Insurance Program expiration. According to NAR, with only one month left, homeowners, consumers, and commercial property owners are at risk of being unprotected and—in worst case scenarios—unable to get a mortgage.
The National Flood Insurance Program was created by Congress in 1968 to provide flood insurance to policy holders in the U.S. and its territories, but residents and business owners can only purchase the insurance if the community participates in the program. In order to do so, communities must agree to mitigate flood risks such as adopting building codes that require new structures built in floodplains "to be protected against flooding or to be elevated above the 100-year floodplain level." Currently, the program covers 5.1 million policies with over $1.2 trillion in coverage for 22,235 communities.
The U.S. House Financial Committee and the National Association of Realtors came to an agreement in July on legislation to reauthorize and reform the National Flood Insurance Program. Reforms to the program included retaining grandfathering and reducing rate increases. At the time, the draft limited proposed increases to fees and rate hikes that were present in earlier legislations.
The agreement brought hope that reauthorization would be quickly approved, but now real estate professionals are feeling uneasy. With major damage done to Texas and Louisiana by Hurricane Harvey and impending damage in Florida from Hurricane Irma, the lapse in coverage could adversely affect millions of homeowners. Aside from hurricane damage, NAR President William E. Brown said the U.S. knows what will happen if the National Flood Insurance Program expires—it’s happened before.
"Home buying activity grinds to a halt, to the tune of 40,000 lost or interrupted sales every month," Brown said. "Meanwhile, existing homeowners, as well as commercial entities, may find their largest asset unprotected if the Federal Emergency Management Administration can't renew NFIP policies that expire.”
According to Brown, the critical reforms have been a long time coming and NAR looks forward to working with the House and Senate once the threat of lapse has been addressed.