Keys Homes
Sunday, March 30, 2014
Hurray, it finally passed

By REGINA CORCORAN Citizen Columnist

The Homeowner Flood Insurance Affordability Act recently passed the House and Senate by a landslide and was signed into law by the president.

This is the tourniquet needed to solve the problems of the Biggert-Waters Flood Insurance Reform Act of 2012. What a strange name for a bill.

First, the real estate market nearly ground to a halt with the sunset of the legislation covering flood-prone areas. When Biggert-Waters was passed ,we discovered the sky was falling.

Flood premiums of $20,000 per year were possible. The sale of a dwelling could trigger an immense increase in flood insurance for the new owner. Even some who already had flood insurance and didn't move, sell, or remodel could face backbreaking increases.

Pre-FIRM homes, those built before the establishment of flood mapping, are paying subsidized premiums. That means the rest of y'all are helping to pay the premiums because we had no idea when the houses were built that flood mapping would be invented and the flood premiums based on our true risks would become sky high. Pre-FIRM owners who paid higher rates due to the enactment of Biggert-Waters are entitled to a refund.

Also, a $25 surcharge for all primary residences and $250 for other buildings will help pay for the subsidies.

However, those premiums will increase at least five percent per year until the subsidy vanishes (20 years from now.) I'm sure the National Flood Insurance Program (NFIP) is fervently praying we will demolish or substantially rebuild/remodel in the next 20 years and the problem will go away.

Speaking of rebuilding, or remodeling, under the Biggert-Waters Act, a mere 30 percent remodel triggered a premium increase. With the new legislation, a 50 percent threshold must be crossed to trigger that increase.

The new bill also reinstates grandfathering. The 2012 act could subject homeowners to big premium changes if the map for their area was redrawn and they found themselves in a higher risk zone. The new law says the rating for your home will stay the same as the day it was built, even if the maps are redrawn. The feature is linked to the dwelling -- not the homeowner and not the insurance policy. So, even if the insurance lapses or they sell the house, the grandfathering prevails.

A dwelling that is not currently in a flood-prone area, but later becomes so due to remapping, will be entitled to the same ramp-up period as Pre-FIRM homes. So, homeowners will not be subject to smash, you're it.

Rather, their rates will start at an artificially low subsidized premium and increase gradually, but steadily, each year until they reach the full risk rate.

What do you think?

Regina E. Corcoran, SRA, is a Florida real estate broker, state-certified residential appraiser and residential contractor. She is president of AmeriRealty Corp. and vice president of AmeriMortgage Corp. She can be reached at Corcoran writes her column exclusively for The Citizen. It appears every other Sunday.

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