Rate Increases Ahead for Some National Flood Insurance Program Policyholders

Changes are coming to the critically important National Flood Insurance Program that could impact real estate transactions and property owners across the country. That’s according to experts from the Federal Emergency Management Agency, which manages the government’s flood insurance program, who spoke to the National Association of Realtors at Flood Insurance 101, a forum during the Realtors' recent meetings in Washington, DC.

Kristin Robinson, senior advisor, summarized last year’s Biggert-Waters Flood Insurance Reform Act, which reauthorized the critically important NFIP through 2017 so property owners could affordably access flood insurance.

NAHB joined NAR in strongly supporting the legislation.  Both groups believe the government’s insurance program saves taxpayers property and money because it increases the number of self-insured properties and reduces the cost of post-flood disaster governmental assistance.

The NFIP is responsible for writing and renewing flood insurance policies for more than 5.6 million home and business owners in more than 21,000 communities nationwide where flood insurance is required for a mortgage. Before Congress passed the legislation, the program operated under short-term extensions. In the past five years, there were 18 extensions and several lapses in program coverage, delaying or cancelling thousands of real estate transactions daily according to NAR’s research, wreaking havoc on real estate and home building markets.

Robinson said the NFIP is $24 billion in debt following several disastrous storms in recent years since the costs and consequences of flooding continue to increase. “For decades the program has made flood insurance available at subsidized rates that did not reflect the true risk of flooding; artificially low rates and discounts are no longer sustainable,” she said.

Andy Neal, actuary, addressed the gradual phase-out of subsidized rates, which was included in last year's legislation to preserve the flood insurance program and critically important property insurance coverage for the nation’s homeowners. Neal said rate subsidies are being phased out over the next several years to help increase the NFIP’s soundness and financial stability.

The majority of policyholders, more than 80 percent, are not subsidized and won’t be impacted by subsidized rate changes since they are already paying full actuarial rates, he said. However, these owners could see routine annual rate increases.

“Only about 20 percent of NFIP policies receive subsidies, mostly older structures built before the community’s first flood insurance rate map was issued, which are known as pre-FIRM properties. Some of these policyholders will be impacted by the gradual phase-out of subsidized rates; an even smaller number will see immediate changes to their insurance policy rates,” said Neal.

Rate changes are likely to affect owners of subsidized pre-FIRM non-primary residences, business properties, and properties that have experienced severe repetitive flood losses. Owners of some pre-FIRM condos and multi-family units will also see their rates gradually increase. Owners of pre-FIRM primary residences will retain their subsidies unless the policy lapses; it suffers a severe, repeated flood loss; or it’s sold to a new owner, which is retroactive to July 6, 2012, when the legislation was enacted. Some grandfathered principal residences will also lose their subsidies over a several year period, but not until the communities’ flood map is revised.

Neal recommended that home and property owners talk to their insurance agent to determine if their property is currently being subsidized. He said flood insurance rates vary based on a property’s location, elevation and flood risk and can be as low as a few hundred dollars up to $10,000 or more if the property is well below flood level and had severe repeated flood losses.

While higher rates may place a greater burden on families, there are investments homeowners can make to either reduce or better access their flood risk so they can continue to protect their families and possessions from damaging floods. According to Neal, homeowners can lower their risk by elevating their property and potentially reduce their flood insurance rates by having an elevation certificate completed to determine the property’s elevation relative to the base flood elevation. Elevation certificates can cost several hundred dollars to complete but could potentially lower homeowners’ flood insurance premiums.

Some homeowners with flood insurance policies have already received quotes for higher rates, which may be caused by several other factors such as improvements to mapping. As FEMA improves its mapping technology and draws more accurate flood maps, some homes may now be located in a flood zone, or a higher risk zone, where flood insurance is more expensive. Also, some insurance agents may adjust rates to correct previous mistakes made about the home's features when they are re-evaluating an insurance policy at renewal.

UPDATE:

Representatives Bill Cassidy (R-LA) and Maxine Waters (D-CA) have successfully attached an amendment to the Homeland Security Appropriations Bill to delay removal of “grandfathered” flood insurance rates for one year.  Efforts are underway to include the delay in the Senate version of the Homeland Security bill. 

The grandfathered and other subsidized flood insurance rates are being phased out under the Biggert-Waters Act that extended the National Flood Insurance Program for five years. The House amendment would delay the phase-out for properties “grandfathered” under older rates in areas remapped into a higher-priced flood zone before September 30, 2014.  The law’s other phase-outs — for older second homes and business properties and for homes purchased after July 2012 — will continue to take effect on October 1, 2013.

In the meantime, the Senate Banking Committee has agreed to hold a hearing on the affordability of the Biggert-Waters rate provisions.  The hearing is expected to be conducted in July.   

NAR and SCR will continue to work with Congressional allies on the NFIP issue and will keep you informed on the progress.

Used with permission
Source: National Association of Realtors

Districts here, districts, there, districts everywhere

Did you know that in Greenville County there exists 28 special purpose governmental districts just for fire service?  Those 28 districts operate 80 fire stations, and only three of those fire stations are shared.  In fact, the districts operate three different training facilities.  And 22 of the districts have elected boards.  The remaining six are appointed by the county legislative delegation.

All of the fire districts rely heavily on property tax milage for funding, which prompted Greenville County Council to form a task force to review and develop a new method for adjusting the districts' millages.  The resulting plan, which goes next to several committees of County Council, calls for a millage increases for fire districts to be subject to a referendum.  The proposal also requires that all fire districts produce audited financial statements before requesting millage increases.

Your Home Builders Association of Greenville has taken the position that there are too many special purpose districts in the county and that they are an anachronism of a time when the county legislative delegation governed the county, which ended more than 30 years.  The association's position is that the various special purpose districts should be consolidated by common purpose, like fire or sewer.

Greenville Water Commission Restores Line Extension Policy, Increase Fee

At its May meeting the Greenville Water Commission restored its previously adopted policy on extending new water lines that had been suspended by CEO David Bereskin.  In the same action, however, the commission increase the fee for extending water lines to $30 per linear foot from $20 per foot.  Under the policy the commission bears the complete responsibility and cost for extending water lines which can cost upwards of $70 per foot, but average about $36 per foot.

The HBA of Greenville agreed to the fee increase.

The commission and its staff will work with the HBA to develop a new line extension policy.  The commission would prefer that developers bear the responsibility and cost for extending water lines.  The HBA leans toward maintaining the current policy.  "It is always our objective to work with government to solve problems in a manner that produces the best result for all parties," Michael Dey, Executive Vice President of the HBA of Greenville said.  "We will work with the commission to develop a new policy in a manner consistent with our government affairs objectives."

Help Wanted in Clemson, SC

Semi-Custom Homebuilder Position for Patrick Square

Established developer/builder is seeking experienced homebuilder to lead its building operation in Patrick Square, a highly successful TND community in Clemson. Must be licensed in South Carolina, knowledgeable, organized, team-oriented and dedicated to high quality standards.

We are looking for an individual who understands how to build in the Upstate, knows the local trades and suppliers, is committed to excellence and continually improving, and is organized and energetic enough to handle 30+ homes per year with another superintendent and our purchasing, estimating, interior design, and sales support staff.

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See www.patricksquare.com for community details.

FHFA: Refinance Volume Remains High In March

The Federal Housing Finance Agency (FHFA) today released its March 2013 Refinance Report, which shows that refinance volumes remained high as mortgage rates rose slightly but stayed near historic low levels. Nearly 462,000 refinances took place in March, with nearly 100,000 completed through the Home Affordable Refinance Program (HARP). This brings the number of total HARP refinances to more than 2.4 million since the program’s inception in April 2009.

In the first quarter of 2013, there were nearly 1.4 million refinances on Fannie Mae and Freddie Mac loans. Close to 300,000 or roughly 22 percent of those refinances were through HARP. The pace of HARP refinances through the first quarter strongly mirrors the fourth quarter of 2012, when HARP refinances constituted 22 percent of total refinances.

Also in the March 2013 report:

• Borrowers with loan-to-value (LTV) ratios greater than 105 percent accounted for 45 percent of the volume of HARP loans through the first quarter.
• The number of completed HARP refinances for deeply underwater borrowers continued to represent a significant portion of total HARP volume. In March, 22 percent of the loans refinanced through HARP had a LTV ratio greater than 125 percent.
• Year to date, HARP refinances represented 63 percent of total refinances in Nevada and 53 percent of total refinances in Florida.
• Through March, underwater borrowers represented 64 percent or more of total HARP volume in Nevada, Arizona and Florida.
• Also in March, 17 percent of HARP refinances for underwater borrowers were for shorter-term 15- and 20-year mortgages, which build equity faster than traditional 30-year mortgages.
• From the inception of HARP through the first quarter, the total number of HARP loans by state include: California (343,303), Florida (212,755), Michigan (164,866), Illinois (164,492), and Arizona (121,989).

Read the complete Refinance Report at FHFA.gov by clicking here.

Dillard-Jones moves its headquarters to downtown Greenville and opens second office in Asheville

Dillard-Jones Builders LLC said it relocated its Greenville headquarters to 115 N. Brown St. in downtown Greenville and opened a second office in Asheville.

Founded in 2004, the company previously maintained its home office in east Greenville.

In March, Dillard-Jones received a license to build homes in Georgia. It’s also licensed in South Carolina and North Carolina. Its second office in Asheville is at 1 Page Ave. downtown.

“Ours is a creative business and we were able to find great office space in the downtown areas of Greenville and Asheville that reflect the creativity and style of our company,” Dillard-Jones President Tom Dillard said in a news release. “We’re excited to be a part of such high-energy areas.”