Now that Congress has settled the ugly dispute that ground federal government to a standstill, state leaders like me are looking for Washington to fix the burgeoning nationwide problem of skyrocketing flood insurance costs. This little-noticed situation has huge consequences for homeowners in Massachusetts and nationwide, and poses a threat to the still-fragile economy.
Following the deadly and costly super-storms of Katrina and Sandy of the last decade, Congress felt compelled to reform federal guidelines with respect to flood insurance.
Unfortunately, the changes, in the form of the 2012 Biggert-Waters Flood Insurance Reform Act, end the federal subsidies for flood insurance and increase rates sometimes dramatically, perhaps by 25 percent on average. To make matters worse, these alterations are simultaneously taking place as a routine redrawing of flood maps. While the new paradigm is still taking shape, early reports suggest that changes could suspend progress in the housing market, in many localities, and send it reeling back to the dark days of the 2008 real-estate downturn.
One of my colleagues, Rep. James Cantwell from Marshfield, uncovered an example of a homeowner seeing their flood insurance going to $68,747 from $16,000 in one year; FEMA ultimately revised the cost. A local realty company, Jack Conway & Company, provided multiple reports of potential buyers leaving deals when confronted with new astronomical flood insurance rates. The changes, as implemented, are excessive and uneven.
Carol Bulman, president of Jack Conway & Company, went so far as to suggest that the new rules would irrevocably change the demographic makeup of coastal communities: “We face the very real possibility that only the wealthy will be able to afford to purchase homes in flood zones – not just the large houses on the beach, but even more modest Capes and ranches that border marshes, ponds and small rivers.”
I’m also concerned that the rates will force financially strapped existing homeowners to choose between paying their mortgages or flood insurance. It’s an unfortunate irony of this new arrangement that homeowners may fall financially underwater in order to pay flood insurance.
Last month, these concerns prompted Attorney General Coakley and me to offer state legislation that limits the amount of mandatory flood insurance for Massachusetts homeowners. If passed, the bill will cap the flood insurance rates resulting from new FEMA maps. Our legislation blocks creditors from forcing homeowners to carry more flood insurance than the outstanding balance on their mortgages, but includes a strong notice requirement so that homeowners understand the risks of underinsuring or self-insuring.
No comments:
Post a Comment