National Flood Insurance Program Expires Just as Hurricane Season Begins

According to the advisory issued by FEMA on May 28th:

The NFIP will not be reauthorized by Congress by midnight of May 31, 2010. Therefore, the Program will experience a hiatus – a period without authority to:

• issue new policies for which application and premium payment dates are on or after June 1, 2010, or
• issue increased coverage on existing policies for which endorsement and premium payment dates are on or after June 1, 2010, or
• issue renewal policies for which the renewal premium is received by the company on or after June 1, 2010, and after the end of the 30-day renewal grace period, until Congress reauthorizes the Program.

David Sampson, president and CEO of the Property Casualty Insurers Association of America (PCI) comments, “Congress has once again failed to extend the National Flood Insurance Program. The flood program will expire on Monday, leaving homeowners vulnerable at a critical time and adding more uncertainty to the real estate market.”

So what are our options right now?

If a buyer has not obtained their flood insurance binder before May 31, 2010, it may be possible to assume the seller’s existing flood insurance policy. The seller must have coverage and will have to transfer it in writing. The annual premium will also need to be pro-rated between buyer & seller at closing, but according to FEMA:

A property owner's flood insurance building policy may be assigned in writing to a purchaser of the insured property upon transfer of title without the written consent of the NFIP.

The Realtor Association of Miami-Dade County reports that it may also be possible to secure flood insurance through a private company such as Lloyd's of London or AIG; however this will be an expensive option for most home buyers.

During the last hiatus this past April, FHA, Fannie Mae and Freddie Mac continued “to insure single family mortgages on homes where flood insurance is normally required but was not secured during a lapse in flood insurance coverage authority.” The lenders had to have a copy of the flood insurance policy application on file and the buyers paid premiums at or before closing, and once Congress re-authorized the flood insurance program, FEMA approved the pending applications retroactively. Reported, not all lenders were willing to fund the loans based on these agencies' guidelines, so check with your lender about your specific situation.

In any case, Congress returns to work on June 7th. Hopefully, renewal of the National Flood Insurance Program will be at the top of their to-do list.

Melanie Dawn Molina Wood, a Realtor with Coldwell Banker Residential Real Estate LLC, is a member of the US Green Building Council – South Florida Chapter and a designated Eco-Broker. She also holds multiple certifications as a Relocation Specialist and currently specializes in Short Sales. For more information about Miami real estate, don’t hesitate to call or text 305-801-3133 or visit www.MelanieDawn.net.