No Flood Insurance? No Problem! Home Sales Go On
Worries over a lack of funding for the government's home flood insurance program have receded—for now.
Home buyers who need flood insurance can go ahead with closings even if they haven't actually purchased a policy.
That's because federal banking regulators issued a statement through Freddie Mac Tuesday, saying "lenders can continue to originate loans on flood-prone properties despite a temporary shutdown of the National Flood Insurance Program."
Congress left for its Easter recess last week without re-newing the flood insurance program's funds, leaving thousands of homeowners more than a little concerned over what to do. The funding expired on Sunday.
"This is certainly good news," says John Prible, vice president of Federal government relations at the Independent Insurance Agents and Brokers of America. "Home buyers just have to put a system in place so that as soon as Congress extends the program, they have the paper work ready to buy the insurance. Home closings are not at risk."
Prible says he expects Congress to put the funds back in the program when it returns on April 12.
"We fully expect the program to get back to where it was in terms of funding," adds Prible. "That includes their promise of making it retro-active for home buyers and policy renewals during this time."
Prible says the only problem is for those needing renewals during the next two weeks. "Renewals can't go through at this point but they should be covered when Congress comes back and votes the funding to cover this period," says Prible. "People just have to wait it out."
Many home buyers are required to purchase flood insurance and the National Flood Insurance Program or NFIP provides coverage when private companies do not. It's purchased through an insurance company and provides more than 95 percent of US flood coverage.
The House passed an extension on March 17, but it stalled in the senate when Senators Jim Bunning (R-KY), Jim DeMint (R-SC) and Tom Coburn (R-OK) objected to the funding's tie in with jobless benefits and other federal programs. They say it would add to the public debt.(Calls to their offices were not returned.)
But Senate Majority Leader Harry Reid (D-NV) has said he promises to bring the matter to a vote when Congress returns.
Some $100 billion is targeted for the refunding. That's includes paying off the $20 billion debt the NFIP has from claims coming from Hurricanes Katrina and Rita in 2005.
Started in 1968, the NFIP has had to face several funding votes in recent years. The next extension would be the fourth one since funding expired on September 30th of last year.
Prible says its time Congress took a longer view on the issue.
"This really has to stop," Prible argues. "It gets weary and homeowners get caught in the middle. It's not good for the housing market. Congress should just plain extend the program on a long term basis."
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