NAR urges Senate to delay Biggert-Waters Act

The National Association of Realtors® continues to urge senators to vote for Senate Resolution 1846, the Homeowner Flood Insurance Affordability Act, which would delay potentially inaccurate and uncapped rate increases on recent home purchases until the Federal Emergency Management Agency (FEMA) investigates and reports to Congress with an affordability solution. A vote could come within the next several weeks. Watch for a future NAR Call for Action.

NAR provided testimony in November and gave several examples of where quoted rates exceeded the true actuarial rate by $10,000 to $30,000/year. Unlike existing owners who see gradual increases, point-of-sale increases are not capped, apply immediately to the new owner and can be as high as $87,500, according to one example provided by NAR.

In a letter, NAR President Steve Brown wrote, “With rates of this magnitude, very few would be able to qualify for a mortgage in 20,000 communities where flood insurance is a prerequisite. And those who qualified and bought there over the past year could be facing foreclosure when their flood insurance is first renewed, unless Congress acts today.”

On October 1, 2013, FEMA imposed full-risk actuarial rates on all properties purchased after July 2012 as a result of the implementation of the Biggert-Waters law. NAR supported the law because it reauthorized the Flood program for five years and ended the uncertainty of shorter extensions and shutdowns that were costing 40,000 home sales monthly.  However, FEMA failed to implement Biggert-Waters in the short timeframe, warn homebuyers or predict the unprecedented magnitude or scope of accompanying rate changes.  FEMA also cannot explain how some property owners who are not subject to the law are seeing increases or why others are receiving widely varying rate quotes when there is supposed to be only one actuarial rate per property.

PAR President Kim Skumanick said the association has heard from Realtors® throughout Pennsylvania about the devastating effects flood insurance rates have had on home sales. “We have many communities that have a large portion of homes in a flood zone, making the properties extremely difficult to sell,” she noted. “It’s very important that FEMA conduct this affordability study and until then, it’s crucial that Congress pass this legislation to delay the uncapped, point-of-sale increases.”

FEMA’s affordability study, required in the Biggert-Waters law, is already eight months overdue from its statutory deadline. According to NAR, the affordability study could hold the key to showing how pervasive the insurance rating errors are and how best for Congress to address them over the longer term. In the interim, the bill would restore the previous rate for those already seeing an increase and postpone future increases for properties purchased or “grandfathered” under previous flood insurance rate maps when new ones have been issued.

For additional information, visit PAR’s resource page.