Flood Insurance Returns at Last

Published: Fri 02 Jul 2010

Lucas Eichmann

On Wednesday evening, the Senate voted to renew the critical National Flood Insurance Program through the end of September 2010. The renewal should permit thousands of real-estate deals to close finally after experiencing delays for the last month.

The month-long hiatus of the NFIP prevented Americans from purchasing or renewing coverage, which has delayed about 14,000 closings per day since the beginning of June, according to the National Association of Mutual Insurance Companies.

The flood insurance program has lapsed three times so far in 2010 but finally proceeded through Congress just as the first hurricane of the season touched land and a federal tax credit on house purchases neared expiration.

Congress also changed the deadline of the tax credit program, allowing Americans 90 more days to take advantage of the subsidy. President Obama will soon sign the measure.

"When you mandate that something has to have flood insurance you have to make a way that it can happen, and when the way to have that happen expires, you are in a predicament," explained Margie Dorrance, the chair of the Houston Association of Realtors.

The challenging part of the held-up renewal of the flood insurance program was that many Americans were depending on the federal tax credit and were unsure if they could take advantage of it, Dorrance added.

"It's very, very helpful that this did get extended because (the federal government is) trying to help transactions go forward, get inventory into the hands of the people that want to buy the house and live in it," she commented. The delay impacted home sales around the country, not just in the Gulf Coast area, but Dorrance thinks the extension will enable the majority of the backlogged transactions to close.

"There were so many of them that were just sitting in a holding pattern," she commented. "I think that those can all start closing now. We're very happy about that."

Galveston real estate agent Michelle Hatmaker reported that one of her clients was ready to buy a new home on June 5 after being uprooted by Hurricane Ike in 2008 but could not close the deal because of the flood insurance program's hiatus.

"She just had this whole package of deadlines, and the flood insurance pretty much affected her moving forward on anything," Hatmaker explained. "But hopefully we'll be able to close within a very short time."