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flood_ladoga120For many years FEMA's National Flood Insurance Program (NFIP) subsidized a federally backed flood insurance program for homeowners, business owners and renters. However, flooding disasters in recent years - including Hurricane Sandy - have left the National Flood Insurance Program with a $25 billion deficit. The program must make up for the losses.

In 2012 the law known as "Biggert-Waters Flood Insurance Reform Act (BW-12)" removed flood-insurance subsidies for more than a million home owners nationwide. BW-12 will roll out in stages and a part of the law is already in effect.  The plan begins to phase in full-risk rates over five years at a rate of 25% per year beginning in 2014 - including those that are affected by FEMA mapping changes.

There are several unintended consequences of the BW-12:

  • Homeowners across the country will be forced to pay sudden and dramatic flood insurance premium increases.
  • Homeowners required to buy flood insurance will see increases in their premiums up to 25% per year until premiums reflect full risk rates.
  • If lenders require flood insurance above National Flood Insurance Program's (NFIP) coverage limit ($250,000 for a home), owners must buy supplemental insurance policy from the private market. Private flood insurance, if available, is often significantly more expensive than NFIP's. Private insurance is regulated by the states.
The National Association of REALTORS® is asking all REALTORS® to respond to a call for action to support the "Homeowner Flood Insurance Affordability Act", which calls for a "time-out" on the BW12. This delay would enable the Federal Emergency Management Agency (FEMA) to complete the affordability study already mandated by BW12, propose targeted regulations to address affordability issues found in the study, and give Congress adequate time to review these regulations.

The "Homeowner Flood Insurance Affordability Act" prudently defers rate increases until FEMA can complete the affordability study mandated by BW12 and propose regulations to target affordability relief. The bill would also create an office of the Advocate for flood insurance rate and mapping concerns. We believe that this is a necessary provision to help property owners. Other than insurance agents, property owners and real estate professionals do not have an effective avenue to pursue concerns regarding flood insurance rating errors and discrepancies.

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