New Hurdle to Housing: No Flood Insurance
Who knew you needed flood insurance in Bergen County, NJ - located on a 100 year flood plain - to get a mortgage?
Andrea Mantia, a producer on CNBC's Street Signs, knows it now all too well. She called to tell me she is supposed to close on a home, but her lender is denying the mortgage without flood insurance. She can't get flood insurance, because "apparently, all insurers get flood coverage via the government/FEMA. Now that Congress has let it lapse, NO insurers are offering new policies," she says. "It's putting a lot of closings in doubt."
1400 homes per day in the United States require flood insurance and cannot go to closing without it. That according to the Texas Association of Realtors.
TheNational Flood Insurance Program hasn't issued a new policy since May 31st, when the most recent extension ran out.
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Mantia tells me it gets updated every five years, but since it ran out in 2009, Congress has just been issuing temporary extensions.
The latest extension is mired in the jobs bill, which is itself still mired in the Senate.
"State Farm has had it with the government," she says. "They just announced it will not write any new flood policies, even if Congress gets their act together."
I found this part of a post put up yesterday by Relocation.com: It's unlikely that State Farm would begin to write flood insurance policies again, even if the NFIP were extended for a longer amount of time. Phil Supple, a spokesperson for the insurance company, told Insurance Journal that "the flood program distracts and pull[s] resources away from other needs of the company."
State Farm announced on June 3rd that it would stop administering the government policies entirely this fall, but now it can't anyway because there's no money.
"I feel that it's just stressful enough to buy a house, but now for the closing to be in jeopardy is ridiculous," says Mantia, who adds that there are actually three closings in jeopardy because the sellers of the home she's buying are banking on her sale to buy their new home, and the same with the sellers of the home they're buying. A big bad domino effect that apparently nobody knew about, not Mantia's broker, lender or seller.
Mantia's closing was pushed back to August in the hopes that Congress will get its act together by then, which it likely will. It sounds like Mantia will still probably get her new house, but I wonder about all those folks trying to close on homes that they bought with the home buyer tax credit. They have to close by June 30th. The summer market wasn't going so well as it is. Just more grief for buyers, sellers, and this very tenuous housing recovery.
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