Realtor Concerns on Flood Insurance Reach Congress

There has been a great deal of activity on Flood Insurance over the past few weeks. Pinellas Realtors have been at the forefront of the national debate on this issue and the effort appears to be paying off. According to Florida Realtors, they try to use Pinellas Realtor examples whenever they speak with any elected official about the looming crisis on flood insurance. Governor Rick Scott even joined the chorus of Florida elected leaders last week calling on Congress to delay implementation of the Biggert-Waters Flood Insurance Reform Act. This Florida Realtor News story on the hearing in the US Senate last week contains a link to the testimony on flood insurance presented to the Senate Banking Committee by the National Association of Realtors. NAR is strongly supporting efforts to delay NFIP rate increases for grandfathered AND newly-purchased properties pending FEMA’s report to Congress on the results of the affordability study required by the “Biggert Waters” NFIP reform act. You can read more about the hearing in the US Senate Banking Committee below.

One of our short term goals is to encourage PRO members to utilize the resources in the Florida Realtors Flood Insurance Toolkit. Our members will join Florida Realtors leaders in Tallahassee this week to testify on flood insurance concerns before the Cabinet as well as testify before the Florida House Insurance & Banking Subcommittee. Please encourage anyone with a flood insurance horror story to complete and return the Questionnaire on the Flood Insurance Toolkit. These real-life examples make all the difference when lobbying the Cabinet, State Legislature, FEMA and Congress.

We had meetings with members of the Pinellas legislative delegation last week, we will have more meetings this week, and we are working with Florida Realtors to pursue several creative solutions at the state level in addition to our efforts in Washington. We will keep everyone posted on those efforts.

Back to the Congressional hearing from last Wednesday, to view the testimony of FEMA Administrator Fugate and others, you can use these links:

• Honorable William Craig Fugate [click to view testimony]
Administrator Federal Emergency Management Agency

• Ms. Alicia P. Cackley [click to view testimony]
Director, Financial Markets and Community Investment,
U.S. Government Accountability Office

• Ms. Christine Shirley [click to view testimony]
National Flood Insurance Program Coordinator, Planning Services Division, Oregon Department of Land Conservation and Development

• Mr. Stephen Ellis [click to view testimony]
Vice President, Taxpayers for Common Sense

• Mr. Birny Birnbaum [click to view testimony]
Executive Director, Center for Economic Justice

If we stand together we believe we can make a difference on this issue. Unfortunately, the window of opportunity with Congress is short.

7 thoughts on “Realtor Concerns on Flood Insurance Reach Congress

  1. I am totally up hauled with the way these new rules will be killing our business, the housing prices, and that without a reason !
    Florida thrives on its beaches, Pinellas County is a paradise to live, where now it will be come unaffordable because of terrible flood insurance rates … If homes on the water and just at the back of it, in V zones are unaffordable and empty, who would want to live just next to it in an X zone ???
    How ridiculous does it have to be, to be understood ?
    I live my house for 16 years, with NEVER any flood problems, but the zone was changed from A to VE without my knowledge or consent around 2003. As the home is considered grandfathered, but now loses it statute in a couple of years, my nice investment becomes worthless, and why ?
    How did we become a country where it is more important to spend in war and politics, but forget the people that made and live in this wonderful country ?
    Lets tax and raise insurances, so everyone moves ???
    Great solution, very intelligent !!!

  2. Why doesn’t FEMA make this a National Disaster Fund that every homeowner carrying insurance nationwide contributes some percentage towards this fund. Then when there are disasters of flood, storm, fire, tornadoes etc everyone is paying for it and not all the burden put on those who live in a flood zone. Florida has the highest rates in the nation. It makes me very angry to see that from 1978-2011 Fema collected over 16 billion in premiums from us and paid out 3.7 billion. We are being robbed and raped by FEMA. You pull our subsidies and then add 25% increase a year for 5 yrs which is a 125% increase!You have us in the poor house and ridiculous rates, calling it a realized rate. These homes and businesses were here before all the codes came about and not everyone can pay cash or afford to knock down to meet your new codes that are constantly changing. This country is just starting to pull itself out of the recession, and rates are going up and our values are going to drop so low only the rich can afford to live here,and less real estate taxes for the state. How about making the foreclosure process faster, people living in these homes for years not making payments and the bank paying their taxes and insurance. What else are we giving for free? WE NEED IMMEDIATE HELP AND THROW THE BIGGERT-WATERS ACT OUT.

  3. NEXT REAL ESTATE CRASH Pinellas home values drop by 50% overnight. (edit/delete)

    That is the headline you will see in all the newspapers by this time next year.

    No, I am not joking or exaggerating.

    If the new flood insurance bill is implemented, it will devastate all American coastal towns, with Pinellas County being the hardest hit in all of the US.

    If I gave you all the little details this post would be 20 pages long (I have included links for detailed information).

    The short of it is:

    Flood insurance rates will go up dramatically for properties built before 1975 in an A and V flood zone. Please do not think you are off the hook if your home was built after 1975, there will still be increases.

    Here are some examples I got from Holehouse insurance company in Pinellas County.

    If you sell your home, here is what the new owner is looking at.

    1960 home with a dwelling value of $148,000 purchased on 3/15/2013. Current flood insurance is$1,072. The house is 7 feet below current base flood elevation meaning an estimated renewal of $22,400.

    1969 home with a dwelling coverage of $250,000 purchased on 12/31/2013. Current flood insurance rate is $1,980. The house is 4 feet below current base flood elevation meaning and estimated renewal of $8,850

    1956 home with a dwelling value of $250,000 purchased on 7/31/2013. current flood insurance rate is $1980. The house is 8 feet below base flood meaning an estimated renewal of $29,100

    If you stay in your home

    an existing homeowner will pay a 25% a year increase until they reach their elevation certificate rate. Using two examples of Per Firm (built before 1975) homes with current flood policies in an A flood zone and a V flood zone

    A flood zone

    current rate is $2,000

    after 4 years is it $4,883

    after 8 years it is $11,921

    V flood zone

    Current rate is $4,000

    in 4 years it is $9,765

    in 8 years it is $23,842

    Commercial properties are also affected. If you buy one you will have to pay the highest rate immediately. If you own one already you will see the 25% yearly increase.

    Condo associations will see a 25% increase yearly on their flood insurance rates.

    Our tiny little Pinellas County has at least 30,000 dwelling that are affected if not 50,000. here is a link to the US FEMA map.,33.1708,-76.9399,43.9898

    Who in their right mind would ever buy or could afford to buy a home for $150,000 with a yearly flood insurance premium of $22,000?

    This new bill will make so many homes absolutely unaffordable for people who currently own it and totally unsellable.

    So what is going to happen?


    This will be a freefall in home values. Think about it, once people get the renewal rate sometime during the next 12 month, they will realize that they can’t sell their home anymore and can’t afford to keep it either. They will stop making payments on their mortgage, the market will be flooded with Short Sales etc. Investors will come in and pick up these properties for pennies on the dollar (land value minus cost for tearing down the existing structure).

    This dramatic decrease in property values will lead to a huge problem not only for homeowners in Pinellas County (and all coastal areas in the Country) but for the counties themselves. Property tax income will probably be cut in half and counties will have to cut back drastically on the services they offer.

    I would not be surprised if we see situations like in Boston and Detroit where Bankruptcy is the only option left.

    Keep in mind, commercial properties are also affected by this new bill. Hotels, restaurants, shops , rental apartments etc. will see a huge increase in their policy premiums and they will have no other choice than to increase all their prices to make up for that and maybe cut down on their employees. The cost of living will go up a lot, the unemployment rate will go up, tourist will find other destinations that are cheaper etc.

    I can go on forever, but I think you get the picture.

    To top it all of, FEMA is doing this because they need money. This time they will not get it from Florida. A lot of our homes down here are “mortgage free” and a lot of the homeowners that I have talked to will simply cancel their flood insurance and take a chance. So, our coastal counties will suffer a lot and people will lose their homes for NOTHING.

    For the last 90 years (since we had the last hurricane hit our area) everybody in Pinellas County thought that the next big flood could devastate the area. Isn’t it ironic that now the next big flood insurance increase will devastate the county ………………

    Below is the link to a petition, asking the government to rethink the issue before it is too late

    PLEASE sign it and spread the word !!! (find a petition for your county)

    This new flood insurance bill will not just affect waterfront properties, it will affect everybody living in a coastal area or near rivers.

    PS. I hear people say that it is “only fair” that people in Florida with their “tropical lifestyle” pay more. Please keep in mind that for all these years Florida has been FEMA’s cash cow and has been paying far more than anybody else. Florida, only gets back 26 cents on each dollar we have been paying into the flood insurance program.

    Map of claims paid by FEMA

    Detailed info about the new flood insurance bill from Holehouse insurance

    Fema website Biggert – Waters Bill

    Link to Chamber of commerce site.

    Like I said before, I think we are looking at the

    NEXT REAL ESTATE CRASH Pinellas County home values drop by 50% overnight.

    UPDATE !!!!!

    please click on this post, it might just be a way around this new flood insurance bill

    1. This was by far the most well written article yet! Thank you for taking the time to write about the seriousness of the impact of these increases.
      Well done!

  4. A way around new flood insurance bill

    By now everybody has heard about the new Biggert – Waters flood insurance bill and how it will devastate the coastal area and crash the real estate market.

    In short, flood insurance premiums will go up by 25% each year for homes in flood zones built before 1975 until they reach the “true risk rate” unless you sell your home then the new buyer will have to pay “true risk rate” immediately.

    For example

    We are trying to sell a home right now for $256,000 in South Pasadena NOT on the water. The current flood premium is $1600 the buyer just got his new quote of $12,900. Needless to say, the buyer wants to back out of the contract.

    In order to save the deal I just got very creative.

    Instead of a straight forward purchase we could do a Lease Purchase ( not to be confused with a lease option). In a lease purchase the buyer and seller agree on a sales price and a sales date in the future. Buyer pays a non refundable down payment and till sales date makes monthly payments that go towards the sales price.

    Till the sales date the seller still holds the deed and therefore the flood insurance policy. So it would be a 25% increase on his old premium and NOT full risk premium right away.

    In our case it could be structured like this

    Sales price $256,000

    Non refundable down payment $256,000

    Closing in 3 years

    Buyer pays all cost for the house including taxes repairs etc

    Seller pays flood insurance. That yearly amount gets divided by 12 and this is the monthly payment the buyer makes to the seller.

    I have talked to tons of people in the real estate business and to government officials and insurance agents about this new flood insurance bill.

    We all agree that this bill CAN’T be implemented and that our government will wake up in the next year or two and realize how big of a mistake they made. Unfortunately by then they will have destroyed the coastal areas and it is going to be too late.

    Maybe my idea is a way around this new flood insurance bill until we get our government to understand what they are doing.

    It is ridiculous that I even have to think around corners like that but this is the only solution I can see.

  5. The lack of Disclosure and Knowledge of the BW Act of 2012 is causing great distress in both buyers and sellers. We understand that FEMA needs to be re-funded and a shift in flood costs may be needed, however, this ACT came upon the public, and the real estate industry without knowledge, with no time to react, consult, and advise our clients the best course of action to prepare for it. A delay, and perhaps a phase-in of the implementation, especially for new purchases of pre-firm homes with low elevations, would make tremendous sense. Devalueing homes and putting recent buyers in a position that they cannot handle the new costs and cause delinquincies, will simply damage the real estate market in a time we are just getting going again.

  6. Hopefully we will be successful in obtaining the delay of this bill going into effect for another year, however, it is not the solution to the problem.

    I am not an insurance expert, but strongly believe the State of Florida is paying for destruction in other parts of the country, including Super Storm Sandy, the re-construction and recent tragedy of the fire associated with the rebuilding from that storm, and all of the tornadoes and devastation that was brought to many families across the mid-west last year.

    Aside from having all of our homes raised above the flood elevation to avoid these outrageous premiums, is there no way the State of Florida can become self insured?

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