Consumers in the market for a home\u00a0have been patiently waiting\u00a0for the Federal Reserve to cut interest rates \u2014 a move it\u00a0seems poised to make\u00a0in September.<\/p>\n
But without action from Congress, there could be another change at the end of that month that makes it temporarily trickier to buy or sell a home in some areas, or to refinance an existing mortgage.<\/p>\n
That\u2019s because the National Flood Insurance Program \u2014 the government-sponsored public insurance program that is the largest\u00a0flood\u00a0insurer in the U.S. \u2014 needs to be\u00a0reauthorized by Sept. 30\u00a0to continue to issue new policies or increase coverage on existing policies.<\/p>\n
If you are buying or selling a house, you want to avoid the end of September and the beginning of October.<\/p>\n
Homeowners insurance policies typically\u00a0don\u2019t cover flood damage, meaning consumers who want to protect their home and its contents from that peril need a stand-alone flood policy. Mortgage lenders may require applicants to obtain such a policy before closing on a home,\u00a0depending on the flood risk\u00a0for the property.<\/p>\n
\u201cThis is about the ability to get a mortgage in a flood zone after Sept. 30,\u201d said Jaret Seiberg, a managing director and financial policy analyst at TD Cowen. \u201cWithout an [NFIP] extension, you\u2019re not going to be able to get a mortgage in any area that requires flood insurance.\u201d<\/p>\n
Congress established the NFIP in 1968 to provide reasonably priced flood insurance coverage. The Biggert-Waters Flood Insurance Reform Act of\u00a02012, which included the NFIP authorization, expired on Sept. 30, 2017. Since then, Congress has extended\u00a0the NFIP\u2019s authorization 30 times\u00a0\u2014 but\u00a0it has also lapsed briefly\u00a0three times in that period.<\/p>\n
\u201cThis has been an issue now for many years where the program faces expiration and Congress, [at the] last minute, reauthorizes it,\u201d said\u00a0Bryan Greene, vice president of policy advocacy at the National Association of Realtors. \u201cWe\u2019re trying to prevent natural disasters, but we seem to always face this potential man-made disaster of not acting timely enough.\u201d<\/p>\n
If the NFIP experiences a lapse in its authority, it will not be able to issue new policies, including for people whose lenders require flood insurance or increase coverage on existing policies (including property owners looking to refinance existing mortgages), according to a spokesperson for the Federal Emergency Management Agency, which operates the NFIP.<\/p>\n
It\u2019s possible the home sale transaction would be halted or be held up until the buyer can obtain flood insurance, said Jeremy Porter, head of climate implications research at First Street Foundation, a nonprofit organization in New York that focuses on quantifying the financial risk of climate change.\u00a0That might entail waiting for Congress to reauthorize the NFIP, or looking for coverage on the private market.<\/p>\n
The latter tactic isn\u2019t easy. \u201cThere are very few private insurers that offer any type of flood insurance,\u201d said Daniel Schwarcz, a professor of law at the University of Minnesota Law School who focuses on insurance law and regulation.<\/p>\n
\u201cThere are some very niche types of policies out there \u2026 but for all intents and purposes,\u201d he said, the NFIP is \u201cthe only available option for flood insurance.\u201d<\/p>\n
And if the NFIP lapses, it could make the search for a private insurer more difficult: \u201cIf you eliminate that foundation, the rest of the market isn\u2019t there,\u201d said Seiberg.<\/p>\n
When the program lapsed from May 31 until July 2 in 2010, 6% of real estate agents reported a delayed or canceled sale,\u00a0according\u00a0to a report by the National Association of Realtors. In that report, from 2011, it estimated a one-month NFIP lapse could affect about 40,000 closings.<\/p>\n
\u201cIf you are buying or selling a house, you want to avoid the end of September and the beginning of October,\u201d said TD Cowen\u2019s Seiberg. \u201cThere is no need to take the risk that the flood insurance program will lapse when you could close ahead of Sept. 30.\u201d<\/p>\n
The NFIP\u00a0insures 4.7 million\u00a0policyholders and\u00a0protects\u00a0more than $1.28 trillion in assets. Those existing policyholders may be shielded by the effects of a lapsed NFIP, said Seiberg.<\/p>\n
Policies that are in force will remain in force and the NFIP will continue to pay claims under those policies during a lapse, according to the FEMA spokesperson.<\/p>\n
If your flood insurance policy\u2019s renewal or expiration date is around Sept. 30, try to renew it early, said Yanjun Liao, an applied microeconomist and fellow at Resources for the Future, a nonprofit research institution in Washington, D.C.<\/p>\n
\u201cCheck the expiration date and make plans in advance,\u201d said Liao, whose research focuses on natural disaster risk management and climate adaptation.<\/p>\n
Homeowners\u00a0considering refinancing\u00a0an existing mortgage may also want to weigh the timing with the Sept. 30 reauthorization deadline in mind, if their lender has required flood insurance coverage.<\/p>\n
The NFIP has been continuously reauthorized because of the \u201cpotential consequences\u201d of limited private insurers available, Schwarcz said.<\/p>\n
\u201cWe\u2019re in this real catch-22,\u201d said Schwarcz.\u00a0\u201cWe have a bad program; no one likes it.<\/p>\n
\u201cBut you can\u2019t get rid of it because people are dependent on it without a better alternative, and no one can agree on better alternatives.\u201d<\/p>\n
Critics often point to policy pricing as a concern.<\/p>\n
Until recently, the NFIP had a reputation as being a subsidized insurance program, in which people in places far away from the coast paid for flood insurance for those who live in high-risk areas, said First Street Foundation\u2019s Porter.<\/p>\n
Then in 2021, FEMA implemented Risk Rating 2.0, a new pricing system that would accurately reflect the cost of an area\u2019s risk. Homeowners and elected representatives of\u00a0coastal states\u00a0have pushed back against that change because of how high premiums got.<\/p>\n
\u201cAll of a sudden, you went from paying $800 a year to paying thousands of dollars a year for your insurance,\u201d Porter said.<\/p>\n
Sen. Bill Cassidy, R-La., spoke in early August about the rising costs of NFIP premiums in his Gulf Coast state, and urged Congress to improve the program.<\/p>\n
\u201cMy team is working on a bipartisan solution that will roll back Risk Rating 2.0, and make flood insurance affordable and accountable again,\u201d said Cassidy in his\u00a0speech.<\/p>\n
Congress is unlikely to let the NFIP entirely expire, given the number of homeowners who depend on the program, Seiberg said.<\/p>\n
\u201cThe real problem is that the flood insurance program is a financial debacle and Congress doesn\u2019t seem capable of fixing it and, instead, what Capitol Hill does is just kick the can down the road,\u201d he said.<\/p>\n<\/p>\n
Consumers in the market for a home\u00a0have been patiently waiting\u00a0for the Federal Reserve to cut interest rates \u2014 a move it\u00a0seems poised to make\u00a0in September. But without action from Congress, there could be another change at the end of that month that makes it temporarily trickier to buy or sell a home in some areas, […]<\/p>\n","protected":false},"author":0,"featured_media":8573,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-8572","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/8572","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=8572"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/8572\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/8573"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=8572"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=8572"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=8572"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}