WASHINGTON – Sept. 7, 2011 – Congress probably won’t reach a long-term agreement on extending and updating the National Flood Insurance Program (NFIP) before it expires on Sept. 30.
Most observers expect Congress to vote for another short-term extension, which has keep NFIP going since 2008, with a few program expirations in the meantime. While Congress usually makes coverage retroactive when it reinstates the program, the lapse causes delays in some home closings if the lender requires flood insurance coverage, and the buyer did not arrange for it before the program went on hiatus.
Homebuyers can avoid problems if they secure flood coverage prior to the expiration date, though it’s never clear how long a coverage hiatus might last. When the program lapsed in June 2010, NAR says approximately 47,000 home sales were delayed or canceled; and if another lapse occurs, NAR economists estimate that 1,300 home sales could be stalled per day.
The two houses of Congress have addressed the problem but not agreed on a solution. The House passed a bill backed by the National Association of Realtors®, the “Flood Insurance Reform Act,” H.R. 1309. It would allow flood insurance premiums to rise up to 20 percent annually along with other changes.
The U.S. Senate introduced legislation that would allow premiums to rise up to 15 percent per year and, at the same time, forgive the program’s debts, which the House has not addressed.