Insurance Blog

Finance Blogs » Insurance » Clock ticks on flood once again

Clock ticks on flood once again

By Jay MacDonald · Bankrate.com
Tuesday, May 8, 2012
Posted: 11 am ET

Ah, spring! The swallows return to Capistrano, Tampa Bay Rays Coach Joe Maddon's hair turns a color not found in nature and the National Flood Insurance Program, or NFIP, is once again set to expire on the eve of hurricane season.

NFIP has been on extended life support since 2005, when Hurricane Katrina dramatically exposed the financial flaws in the troubled program. Since then, Congress has granted short-term extensions to NFIP, often at the 11th hour, while committees wrestle with different approaches to reform.

Unfortunately, extensions are by no means automatic. In 2010, Congress allowed NFIP to lapse for several weeks, a move that prompted strong rebuke from the Federal Emergency Management Agency, which oversees the flood insurance program.

Such periodic ticking-clock thrillers send chills up the spines of real estate agents, homebuyers and home sellers alike because when NFIP can't write said policies, mortgage lenders can't close sales in areas where flood coverage is required. NFIP's 5.6 million existing policies remain in effect during lapses however.

"A lapse in the NFIP has a rippling effect. Property owners are unable to complete their mortgage transactions,” said FEMA associate administrator Dave Miller in an interview with Insurance Journal last week. Miller said the National Association of Realtors estimates that a NFIP lapse disrupts as many as 1,300 real estate closings per day nationwide.

FEMA Administrator Craig Fugate has asked Congress for a two-year extension before NFIP expires at the end of May. But some groups, including an insurance industry group called SmarterSafer.org, are pressing the Senate to pass its pending flood reform legislation to match the House, which passed its version last year.

Miller wasn't optimistic that Congress will take up flood reform in earnest this year however.

"I see it all over the board," he said. "It's uncertain right now where it's going to go."

Follow me on Twitter.

Subscribe to Bankrate newsletters today!

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.