Property owners who opt to purchase flood insurance in the private market rather than through the National Flood Insurance Program (NFIP) may do so under current rules, but they risk paying higher rates if they return to the NFIP. H.R. 2901, the "Flood Insurance Market Parity and Modernization Act," unanimously passed 419-0 by the U.S. House of Representatives late last month seeks to alleviate that concern.
REALTORS® praised the bill's passage, calling it a step forward for reform of the broader flood insurance system. Environmental organizations, insurance and taxpayer groups also support the measure.
"REALTORS® know that a robust National Flood Insurance Program is important for protecting consumers and ensuring property sales can move forward in 20,000 communities nationwide," said National Association of REALTORS® (NAR) president Tom Salomone. "For many, the NFIP offers the only source of coverage that meets federally-related mortgage requirements and protects properties in the 100 year floodplain. At the same time, consumers who wish to purchase insurance in the private market should have the freedom to do so."
Supporters say this legislation will help foster a vibrant private flood insurance market. Expanding the flood insurance market would improve coverage, help reduce rates, and tailor coverage to a wider population. Homes in high-risk flood zones with mortgage loans backed by Freddie Mac or Fannie Mae must carry flood insurance.
Under current regulations, the NFIP requires homeowners to retain a minimum amount of flood insurance coverage to maintain the lowest rates available within the NFIP. Those same regulations treat consumers who move to private insurance as having had a "break" in coverage, even if the private insurance product offers comparable coverage for the property.
Consumers often will return to the NFIP when a private insurance product goes up in price or is no longer available. In that instance, a homeowner can only do so in the face of a rate hike.
H.R. 2901 would change this by clarifying that private flood insurance that meets state law provides continuous coverage. If the bill becomes law, property owners could move seamlessly between the NFIP and private insurance markets without the risk of arbitrary rate increases.
Karen Trolan, president of the Silicon Valley Association of REALTORS®, said this legislation is a step in the right direction and will alleviate worry for homeowners facing increased premiums. "This legislation is very important to consumers because flood insurance is expensive. This bill will allow consumers to return to the NFIP at a reasonable cost if they choose to," said Trolan.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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