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St Augustine Real Estate Information

March 22nd, 2008 7:38 PM

What is the fundamental issue?

The intensity of natural disasters in recent years has made the acquisition of adequate insurance for residential and commercial properties very difficult in some areas. Insurers are declining to write policies, canceling existing policies, and increasing premiums and deductibles on existing policies.

What does this mean to the Real Estate Business?

If prospective purchasers of real property are not able to obtain insurance, they may not be able to secure a mortgage, which could result in a depressed market and lead to diminished property values in disaster-prone areas.

NAR Policy:

The primary emphasis of federal disaster programs should be the development of a highly co-ordinated system for prevention and for remedial assistance.

The goal of any federal natural disaster program should be the promotion of available and affordable insurance for residential and commercial properties in disaster-prone areas.

A uniform policy for administering the flood insurance program should be adopted, eliminating the existing double standard which denies insurance coverage for certain flood prone areas, such as coastal barriers, wetlands, and other environmentally sensitive areas, yet retains coverage for the remainder of the United States subject to flooding. Administrative and legislative actions to alter the federal flood insurance program or disaster prevention regulations must ensure legitimate property rights and reasonable development opportunities are not abridged.

The federal flood insurance program should continue to include subsidies for second homes, vacation homes and rental properties. Non-primary residences should be given the same consideration as primary residences.

The federal flood insurance program should impose "full risk" premiums for flood insurance on repetitive loss structures that have repeatedly (i.e., more than two occurrences) suffered insured flood losses and have declined a reasonable offer of mitigation funding from FEMA, except in states which have been granted a federal exemption.

Funding should be appropriated to FEMA's flood hazard mapping program that is sufficient to provide for the updating and modernization of FEMA's flood hazard mapping system. NAR will work in conjunction with FEMA to develop a funding plan.

Legislative/Regulatory Status/Outlook:

The House Committee on Financial Services on September 26, 2007 passed H.R. 3355, the Homeowners' Defense Act of 2007. The bill provides a federal backstop for state-sponsored insurance programs. The House of Representatives passed the bill in November 2007 by a vote of 258-155. A related bill, S. 2310, was introduced in the Senate in November.

The Senate Committee on Banking, Housing, and Urban Affairs on August 1, 2007 passed a bill, S. 2286, to create a bi-partisan, blue-ribbon commission to study insurance availability and affordability issues and report back to Congress by December 2008 with findings and recommendations for action.

The Chairmen of the respective House and Senate committees of jurisdiction are heading down different paths on this issue, with Senate Banking Chairman Dodd pursuing a more deliberate, and slower course of action (e.g., a bi-partisan commission) and Chairman Frank supporting more aggressive action (e.g., H.R. 3355). There may be room for compromise on the issue, but so far neither Chairman has indicated a willingness to deviate from his stated position.

An additional complication is found in legislation to reform the National Flood Insurance Program (NFIP), specifically that the House bill includes a controversial provision that expands the NFIP to allow wind insurance to be sold through the program. Some in Congress view the wind provision in the NFIP bill as a competing measure to H.R. 3355. The Senate NFIP reform bill does not contain a wind provision.

Posted by Cindy Balla on March 22nd, 2008 7:38 PMPost a Comment (0)