By Steve Brown, First Vice President, National Association of REALTORS®
On December 17, Congress passed an extension of the National Flood Insurance Program, known as NFIP, until May 31, 2012. This is good news because NAR research estimates that each day of an NFIP lapse results in the delay or cancellation of 1,332 home sale closings nationwide.
Floods are a devastating problem with a huge impact, not only on the real estate business, but on human lives. Anyone who has experienced the personal loss and the accompanying life disruption of home flooding knows how debilitating this is.
It doesn’t matter where one lives to be affected by flooding. From 1990 to 2005, flood disasters were declared in every state—along rivers and lakes, behind levees and dams, anywhere snow melted or rain fell.
Because of the rising cost to taxpayers of post-disaster payments for uninsured properties and the lack of a private market for flood insurance, Congress created NFIP in 1968. The idea was to ensure that, through NFIP, homeowners and renters could access affordable flood insurance.
Today, 5.6 million property owners rely on NFIP in 21,000 communities where flood insurance is required.
Adding to the problem, private markets will not guarantee access to affordable flood insurance. The four large insurers that write virtually all the private flood insurance today do so only for “high net worth” owners and high-value property at an average price twice the NFIP’s.
NAR is committed to protecting the long-term stability of the NFIP and to ensuring that flood insurance rate maps are regularly and accurately updated. Reauthorizing the NFIP saves taxpayers both money and property. That’s because historically, NFIP has collected enough revenue to cover its cost or pay back a short-term loan from the U.S. Treasury with interest.
Without NFIP, there would be more uninsured and unmitigated properties, taxpayers would still be “on the hook” for disaster assistance to these properties. Also, there would be no premiums to pay down any remaining loan balance or collect interest.
And not only does the reauthorization of NFIP makes good sense economically, it also is another element in bringing stability to the housing market. The real estate consumer will feel more confident in purchasing a home knowing that the property can be reasonably insured. This in itself brings stability to housing values and prices.
Over the next six months, NAR will continue to push Congress for a five-year NFIP re-authorization bill to provide certainty and avoid further disruption to real estate markets. Your Calls for Action remain essential in getting the message to Congress to stop this ongoing uncertainty when it comes to housing policies. Keep on the lookout for upcoming activity, and be sure to let Congress know where REALTORS® stand.
By Gary Thomas, 2012 President-Elect, National Association of REALTORS®
I have some great news to share with everyone! Last night Congress voted to restore loan limits and the maximum cap for Federal Housing Administration loans. Their action reinstates the loan limit at 125 percent of area median price up to $729,750 for two years and extends the National Flood Insurance Program until December 16th, with no lapse.
This is good news! Higher loan limits will make mortgages more accessible for hard-working middle-class families throughout the country. In fact, nearly two-thirds of buyers who will be helped by the loan limits extension have incomes below $100,000. On flood insurance, the extension until December 16th ensures no lapse, but we still need to push for Congress to pass the five-year reauthorization. Contact your representative to reauthorize NFIP for five more years.
Opponents of higher loan limits mistakenly argue that only wealthy borrowers benefit from the maximum cost limits. But in 2010, the FHA was used by 56 percent of all first-time homebuyers, and 85 percent of borrowers obtaining homes at the higher loan limits had incomes below $150,000. In addition, 60 percent of all African-American and Hispanic homebuyers used FHA.
The truth is that it actually depends a lot on where in the country the borrower lives. Geography often dictates what the price of “affordable housing” is. Last month’s reset to 115 percent impacted 669 counties in 42 states and territories, with an average loan limit reduction of more than $68,000. We support giving middle-class borrowers the same access to affordable mortgage financing, no matter where they make their home.
For example, many people think of California as a high cost state, and there are many areas where it is. San Francisco will benefit because many middle class homes bump up against the $729,750 limit. What many people don’t know is there are many counties in California that are not considered high cost and will benefit. Take Fresno County, for example, prices will go from $281,750 to $311,250 to qualify. As you can see, this really benefits consumers no matter where they live.
For a great analysis, see the video below.
Statistics for last year show a decline in mortgages for higher priced homes, in spite of historically low interest rates. This suggests that sales in the higher-priced portion of the markets were stymied relative to the lower price ranges during the period leading up to the change in the conforming loan limits. This negatively impacted our businesses at the very worst time.
Yet, not long ago, the effort to reinstate the loan limits was dead in the water. Several members of Congress let us know it would never happen. But we didn’t give up. We showed Congress what REALTORS® are made of—strength and grit! We sent out a Call for Action on both these matters, and we had an impressive response from members. And you know what? Congress listened! That’s why these Calls for Action are so important, and I thank you for your overwhelming response.
Those of you who answered the call helped make a difference, and I urge you to keep up the good work by continuing to respond when asked. And be sure to answer the call for action to reauthorize NFIP, if you haven’t already. Again, thanks for your help!
Ever have a bad dream that just doesn’t stop? It just keeps repeating itself. You don’t want to close your eyes cuz you know what’s coming!!! For REALTORS®, that recurring bad dream is Congress letting the National Flood Insurance Program expire. What the heck were they thinking?
REALTORS® have been urging Congress to pass a comprehensive National Flood Insurance Program (NFIP) reform bill all year long. We conducted a Call for Action in April. I had the privilege to testify at Congressional hearings about the importance of the program to the real estate market and the general economy. Recently, we urged action during our midyear hill visits with this issue being one of our top talking points. Yet once again, Congress left town on the holiday weekend without reauthorizing the NFIP and the Section 502 Rural Housing Program. As a result, thousands of transactions have come to a stop, again. What the heck were they thinking?
How do we rid ourselves of this bad dream?
Let me give it a shot – we let Congress know, again, and again, and again if necessary….. Anything that holds up the sale of a home, for whatever the reason, hurts our communities, stifles our economic healing, and halts real estate’s fragile recovery. Regardless of your location, rebuilding our markets in every corner of America is in every REALTORS®’ interest, but more importantly every taxpayers’ interest, every homeowners’ interest, every renters’ interest, every property investors’ interest, everyones’ interest. What the heck were they thinking?
You may ask yourself – there are no floodplains in my market, so why should I care? That’s a fair question. Let me give that a shot too – Lenders from every corner of our nation hold up capital when the market is uncertain. When the NFIP isn’t in place it gives lenders a reason to pause. It makes them more concerned about this short term band aid approach that it destabilizes the financial mortgage markets even more. See, every mortgage has some phrase or clause that requires the borrower to keep the asset (home) insured. If there is no insurance, the lender has the right to foreclose on existing loans, or not make the loan at all, for new ones. Now, you and I know today, or anytime for that matter, the lender doesn’t want your property back. With this uncertainty that you will be unable to insure your home, the lenders are even more reluctant to lend. This hurts home sales everywhere. It hurts all of us! What the heck were they thinking?
To make matters worse, Congress has also abandoned the Section 502 Rural Housing Program. The housing program provides zero-down payment mortgages to eligible families in rural area of every state. Many of these families signed contracts before April 30 and plan to utilize the homebuyer tax credit. If this program is not restored soon, they will lose their opportunity for home ownership. What the heck were they thinking!
I’m a lot ticked, can you tell? Yesterday, NAR sent you a Call for Action urging Congress to extend the NFIP and Rural Housing Program immediately. Please, now is the time for the REALTOR® Party to speak with one voice, to urge Congress to renew both NFIP and the Rural Housing 502 program and do it now!.Give our lobby in DC the strength of numbers they need. What the heck were they thinking?
Tell everyone you know, post this, tweet it, Facebook it, or write your own version! Get folks mobilized, you can do it! Go to REALTORACTIONCENTER.com “Call for Action: Congress Abandons Critical Housing Programs – Again” spend a few seconds and do a couple clicks and let Congress know how important this is for our citizens!
Direct your clients to these sources for more information: FEMA, FHA, Fannie Mae, Freddie Mac and the VA. Remember REALTORS® are the Heart of the Market! — Moe Veissi, 2010 NAR First Vice President.
Floods occurring in South Dakota, Rhode Island, Tennessee, Kentucky, Mississippi and a host of other areas and regions in this country.
Does something strike you about this list of states? These are not the usual coastal states where flooding is thought to occur. Nope, not Louisiana, or Florida, or Texas, yada yada. These are interior states for the most part that have experienced catastrophic water disasters (we’re not talking hurricanes, or tornados, earthquakes, mudslides, sinkholes, volcanoes, forest fires, or a host of other natural disasters that seem to be prevalent recently).
We’re talking about water — debilitating, incapacitating, and devastating flooding events that tear homes and buildings from their foundations, flood basements and living areas. This results in depositing tons and tons of silted water into homes, taking memories and irreplaceable articles from families forever. Pictures of Grandma or Johnny in his 1st baseball game, or a high value stamp collection, even more sentimental, letters from your spouse before you were married. These things are irreplaceable, unmatchable.
OK, we can go out and buy new furniture, carpeting, replace molding, drywall, appliances, even get someone to rebuild the entire house, but those sentimental possession are forever lost, and will only remain in our hearts.
On March 28, 2010, Congress allowed the statutory authority for the National Flood Insurance Program to expire. Listen to this, from September 2008 till March 28th 2010 Congress previously adopted 6 , yup six, short term extensions. The most recent extension to May 31 makes it seven.
The reality is when Congress punts on this issue as often as they have without making a commitment they debilitate a fragile recovering real estate market. This, then, freezes the well intentioned buying public, and destabilizes the lending communities that would normally depend on their mortgages being backed by insurance.
Lawrence Yun, NAR’s chief economist, says every home sold generates some $60,000 worth of additional revenue in the first 12 months after sale with things such as landscaping, painting, furniture, carpeting, services, and more. Now, is not the time to further curtail the economics of a solidifying residential real estate market and the peripheral jobs and revenue that it creates.
Congress says the program is $20 billion in debt. I say if we keep on being reactive rather than proactive, then events like Katrina which cost $88 billion in government assistance will fester.
Note that fully about $26 billion of that $88 billion in costs went to non- and under-insured properties. A cost that does need not have to be borne by Mr. Taxpayer, which means you and me.
Rep. Maxine Waters (D-CA) introduced a bill to reauthorize the flood program for 5 years. Rep. Gene Taylor (D-Miss.) introduced another that would allow homeowners to purchase comprehensive insurance under the program and know that there would be no lengthy legal disputes by insurers as to if the cause was flood or wind driven water. Premiums would be risk-based and actuarially sound. The nonpartisan Congressional Budget Office has scored the bill as budget neutral, meaning the bill pays for itself. A win-win!
Look there are a myriad of other good reasons for reestablishing the program and for a longer time frame but rather than go into each one, which I’d be happy to discuss with you, please just recognize something you and I know……it’s a lot less costly to prepare ahead of time than to fund recovery efforts.
Encourage your Congressmen and women to support the needed changes to the NFIP and develop meaningful reform for property owners and renters. Thanks for listening – Moe Veissi, 2010 NAR First Vice President
This past week, Rhode Island, my home state, was struck with a 200 year flood. It was in every way ‘biblical.’ The state averaged less than 50 inches of rainfall a year. March normally sees about 4 to 5 inches. Before this past week we had seen 7 inches…a lot of rain, but not a record. The problem is that this year’s rain fell on already saturated ground. On March 29, a perfect rain storm hit the state and stalled. In the course of 48 hours over 9 inches of rain fell on ground that could absorb no more.
Photo courtesy U.S. Army Corps of Engineers, New England District
It will be major not just in terms of dollars lost, but rather in costs to families. Numbers that are thrown around about people who lost houses are shocking. But, each number is a person. Sometimes we forget that…it is easier to measure cost in the value of things lost, but lost photographs, keepsakes, flags, wedding dressings, furniture, heirlooms, electronics, and personal treasures are immeasurable.
The “I survived the Rhode Island Floods of 2010” T shirts are already available. We survive and endure, but at a price. It is difficult to remain strong and positive with such a hard hit. Prayers, kind words, emails, cards and calls all help, but this is a real challenge to our confidence.
We have obviously been declared a disaster area. FEMA is here and helping. We are thankful that those folks who own homes next to the Pawtucket River had access to flood insurance. However, people who are looking to buy right now next to the river are literally up a creek. Why? The National Flood Insurance Program was not extended before Congress left on their Easter recess.
The impact of this inaction has been felt immediately. Scheduled closings have become more onerous, causing delays, or even worse being cancelled because flood insurance is not readily available. Even if buyers don’t live in a flood plain, lenders everywhere are holding back because the business environment is unstable and they are unsure if the flood insurance program will be extended. This undermines real estate, which is in a fragile state of recovery. Everyone suffers because of the lack of Congressional action.
NAR issued a Call for Action to urge Congress to promptly complete their unfinished business when they return from the Easter recess by extending the NFIP, and also the Rural Housing Program.
While Noah’s Ark may have worked during his day, in 2010 we need an insurance ark that Congress can build immediately by extending the National Flood Insurance Program. – Ron Phipps, 2010 NAR President-Elect
