Posts Tagged ‘flood insurance’

Flood insurance program extended

August 1, 2019

Not many people seem to agree on anything in D.C. right now, but there is one thing receiving praise from the National Association of Home Builders (NAHB) and National Association of Realtors (NAR) – flood insurance.

Democrats and Republicans worked together to reauthorize flood insurance through most of 2024. The NAR President praised the bipartisan agreement to provide some stability for national flood insurance for years to come. A strong flood insurance program helps stabilize the housing market and provide affordable housing in areas at a higher risk of flood damage.

It wasn’t that long ago some people thought the flood insurance program wouldn’t receive more funding, and now we have five years authorized – an eternity in politics these days!

Flood insurance isn’t just for the coasts. Sure we think of places like Savannah, Charleston, and New Orleans, but there are plenty of places in the metro Atlanta area in flood zones. Without this program, large areas of residential homes in the US would be at risk causing a housing shortage and creating more issues in the housing market (especially when it comes to affordability).

A job well done on a program impacting millions of families in the U.S.

Government impact on housing

August 7, 2018

Sometimes the government gets involved in areas, and things get worse. Here is one area where inaction would be really bad – flood insurance.

On the last possible day, Congress avoided a lapse in the federal flood insurance program when the Senate voted to extend the program through the end of November. The National Flood Insurance Program would have expired July 31 without this action. So the program has been extended, but still doesn’t include any reforms to the program. Despite years of debate and proposals to reform the program, reforms have stalled. In lieu of any changes, Congress has kicked the can down the road another few months. We’ll get to do all of this again in a few months.

This isn’t a case of “they’ll do anything to prevent a lapse of flood insurance coverage.” Congress has let the national flood insurance program lapse some in the past few years. Here is hoping the next change/extension/reform won’t be at the very last minute, but something tells me it will be.

In other mortgage news from the government, it appears the current set up for FHA mortgage insurance will remain the same. There will be no decrease in the monthly premium AND the insurance will still be permanent for the life of the loan.  FHA’s insurance program works differently from private mortgage insurance, which typically falls off after a certain amount of time.

The FHA’s policy wasn’t always this way. The FHA’s previous policy required borrowers to pay mortgage insurance premiums until the outstanding principal balance reaches 78% of the original home value, but the FHA instituted the life of loan policy back in 2013. This action was part of the effort to improve the status of their mortgage insurance fund. While there were some good years of rebuilding the fund, the decline of the funds balance in 2017 caused FHA to pause in potential changes to mortgage insurance.

Currently, the mortgage insurance is so high on FHA loans that it rarely makes sense for a borrower to consider using an FHA loan unless they have really low credit and/or a very high debt threshold. Good credit, low debt, but short on the down payment? Conventional loans allow only a 3% down payment (compared to FHA’s 3.5% down payment). Hopefully FHA can update their mortgage insurance policy in the near future to provide more options for well qualified borrowers.

Looking to buy a home before the end of the year? Ready to have a new home for the holidays?!? If you are purchasing in Georgia, contact me today. I’ll get you ready to make an offer in one quick phone call.

Flood Insurance Premiums Not Increasing

April 29, 2014

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Flood insurance premiums are not increasing… for now at least. Congress passed a bill in 2012 (The Biggert-Waters Flood Reform Act for those who are curious about the bill’s name) that would increased flood insurance premiums to help bring FEMA’s flood insurance program out of its current deficit.

The housing industry (realtors and mortgage) argued this would hurt housing affordability and home values by slowing real estate sales and financing. With President Obama recently signing a bill that would delay those increases, it gives all sides an opportunity to come up with other solutions (and hoping a major natural disaster doesn’t occur in the meantime).

One of the proposed options to deal with flood zones would solve both problems – not needing the higher premium and less exposure for natural disasters. In Obama’s recently signed bill, there is money available to begin buying out homeowners in flood-prone coastal areas. The idea would be buyout homeowners, demo the homes to return the land to their natural states, and create a buffer zone against future flooding. Missouri worked through a similar program with FEMA that has offset millions in potential flood loss in the Mississippi River areas.

By keeping flood insurance premiums from increasing, it will continue to help the housing recovery without worrying about higher monthly payments from increased flood insurance – not to mention those who already own homes in flood zones who would see a dramatic increase in their monthly payments. So that part is good for the housing market… maybe not good for tax payers if there is another massive natural disaster.

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