- April 28, 2024
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Homeowners and the housing market are at the mercy of Congress. This is nothing new. Many blame the housing crisis on Washington’s effort to increase homeownership by backing sub-prime mortgages. Unfortunately, people who could actually afford homes had already bought them. The rest is history.
Through their inaction, Congress created another crisis for the housing market. To solve it, Washington extended the National Flood Insurance Program for five years, ending Sept. 30, 2017. The extension will bring a degree of certainty to the mortgage and real estate industries, which have suffered through 17 60-day extensions since 2008 and two temporary shut downs, including one that reportedly stalled more than 40,000 home sales in June 2010.
One-third of the 5.8 million existing NFIP policies insure properties in Florida. The program was set to expire again July 31. Failure to renew would have jeopardized thousands of potential sales.
But the certainty comes at a price. The NFIP has an $18 billion deficit, mostly incurred from payouts for Hurricane Katrina in 2005. The new bill raises the maximum annual premium increase from 10% to 20%.
It also mandates that currently subsidized premiums (for commercial properties and second homes) and for properties with repetitive flood claims be raised by 20% annually until they reach actuarially adjusted levels. Minimum deductibles will also be set.
