Congress votes to keep the NFIP, which provides 5.6 million people with coverage
On Friday, Congress gave its approval to extend the National Flood Insurance Program by another 5 years, ensuring that 5.6 million people will be able to maintain their current coverage.
The decision was made to help to keep the fragile housing market from additional harm.
If Congress had chosen not to renew the program, the result could have been devastating to the housing market, as prospective homeowners in areas considered at risk of flooding would not be able to refinance loans or close on their mortgages, as none of the required flood insurance coverage would be available.
In 2010, a lapse in the flood insurance program of two months led to the daily cancellation of 1,400 home sales.
The NFIP has been around since it was first created by Congress in 1968, when there weren’t many private insurers willing to provide this protection. This meant that the government was left to foot the bill when this type of catastrophe occurred. Many of those who have this program’s protection live in areas that are considered to be at high risk of flooding, and where federally regulated lenders require coverage in order to close mortgages.
Until 2005, when Hurricane Katrina and the hurricanes and tropical storms that followed struck the country, NFIP had been essentially self sustaining. The damage from that year, and the years that followed, have left the program in debt to the Treasury for almost $18 billion.
When Congress approved the program’s extension, it did so in the hopes that its financial position will be improved, by giving the government more flexibility for increasing its rates. It will also be terminating the coverage for some types of property, such as for vacation homes, though not primary residences.
The measure was included within a bill package. It made a number of different changes regarding the assessment of hurricanes and their damage, and changed the Federal Emergency Management Agency (FEMA)’s mapping of the floodplains. FEMA, which runs the flood insurance program, has also had its efforts streamlined for moving or raising structures that are causing repeat claims to the program’s fund.