By Michael Kraus on October 1, 2010
Another real quick update on a typically slow Friday:
The National Flood Insurance Program (NFIP) was officially extended today with the passage of S. 3814: National Flood Insurance Reextension Act of 2010. The NFIP is the primary source for flood insurance in the United States, and it was allowed to lapse earlier in 2010. It had been extended temporarily several times, but the new extension is permanent (relatively speaking) and will extend the program until September 30, 2011.
Lenders will generally not fund mortgage loans for homes in flood-prone areas that do not have flood insurance. Due to the fact there are almost no other sources for flood insurance, thousands of closings were held up while the NFIP was not in effect. For more information on the National Flood Insurance Program you can check FEMA’s website here.
Good news for many homeowners whose closings have been held up due to lack of flood insurance: the House of Representatives passed a bill (H.R. 5114) that would extend the National Flood Insurance Program (NFIP) until 2015. The NFIP has been extended temporarily several times over the past year, most recently in early July, lapsing at least once. According to the above article from Mortgage News Daily, over 1200 home sales were delayed or fell through every day the program was lapsed because of borrowers’ inability to get flood insurance, which is required by lenders for homes in flood prone areas.
The National Flood Insurance Program is the main source of flood insurance in the United States because there are very few private insurers who offer flood insurance. The program would change somewhat under the new legislation, if it passes the Senate:
- maximum coverage limits would be raised
- some premiums and deductibles would be increased as the program attempts to recoup some of the losses taken during Katrina
- renters in flood-prone areas would receive notice of their eligibility to purchase flood insurance
Flood insurance is being purchased more and more by homeowners outside of flood zones as the severity of recent floods has often affected areas that are outside traditional risk areas. Most flood damage is not covered by traditional homeowner’s insurance.
In order for the extension to be made permanent, the legislation will still need to pass the Senate. We will keep you updated on any developments in this story.
Loading ...
