House-Senate Plan Could Delay Flood Insurance Increases
WASHINGTON – Oct. 29, 2013 – A bipartisan group of lawmakers in the
U.S. House and Senate, including Florida Sen. Bill Nelson, announced
an agreement to delay flood insurance rate increases under the
National Flood Insurance Program (NFIP). The bill – The Homeowner
Flood Insurance Affordability Act – will be introduced today.
Important note, however: For the bill to become law, it must pass a
vote in the House and Senate, and President Obama must sign it.
Supporters of flood insurance relief see this announcement as a ray of
hope – not a declaration of victory.
So far, neither the House nor the Senate has scheduled a vote, and
observers say it could be January or later before they take up the
issue. In announcing the bill, Nelson said he asked legislative
leaders to push for a quick vote.
The legislation would delay rate hikes for probably four years by
creating a timeline. First, the Federal Emergency Management Agency
(FEMA) would have to complete an affordability study – a requirement
that has not yet been met, even though it was part of the original
Biggert-Waters Flood Insurance Reform Act that sparked the rate
increases. FEMA expects that study to take up to two years.
Once the affordability study is completed, FEMA would have 18 months
to propose regulations based on the findings, and six months to
allow consumers to respond to its proposed regulations.
“The bill takes the crucial first step toward delaying further
implementation of some rate increases in the Biggert-Waters Flood
Insurance Reform Act of 2012,” says National Association of
Realtors® (NAR) President Gary Thomas. “This will allow FEMA to
complete an affordability study that was mandated; propose targeted
regulations to address any affordability issues found in the study;
and give Congress adequate time to review those regulations.”
Other provisions if the bill becomes law in its current form
• It creates a new Flood Insurance Rate Map Advocate within FEMA to
work on behalf of policyholders.
• FEMA must prove, through certification, that the analysis it
conducts on an area’s flood insurance risk uses a modern, risk-based
• FEMA may reimburse policyholders who successfully appeal a flood
map designation with National Flood Insurance Funds
“NAR supports the ‘Homeowner Flood Insurance Affordability Act,’ and
urges its immediate consideration,” says Thomas.
© 2013 Florida Realtors®
Up For Air: Big Decline In Underwater Mortgages
- By Brian O'Connell
The home mortgage market received some good news recently with reports
that underwater mortgages have been drying up fast, putting the U.S.
housing market on firmer, higher ground.
According to CoreLogic, 2.5 million U.S. home properties in the
second quarter of 2013 emerged from being in negative equity
(meaning their mortgage balance was higher than their home’s
value)—a state commonly referred to as being underwater. The real
estate data service found that 7.1 million homes, or 14.5 percent of
all residential properties with a mortgage, were still in negative
equity at the end of the second quarter, down from 9.6 million homes
at the end of the first quarter. The total number of mortgaged
residential properties with equity currently stands at 41.5 million.
CoreLogic reported that the problem is consolidating, with 35
percent of all negative equity mortgages in five states — Florida,
Nevada, Arizona, Michigan, and Georgia.
What’s led to the significant turnaround reflected in the data?
“The U.S., and more specifically the Georgia market, have been in a
recovery period for about 18 months now,” said Cal Haupt, chief
executive officer at Georgia-based Southeast Mortgage. “Valuations
are returning to normal valuations, and in some cases appreciating
beyond what was expected.”
Mark Twerdok, head of KPMG’s credit risk practice, agreed.
“Seeing fewer underwater mortgages is no mystery, given the
continued rise in home values over the last 12 months,” Twerdok
said. “Investor buying has been the initial driver of the
appreciation in areas with the most underwater homes. Now, investor
buying has widened to include the owner-occupied market [buyers who
intend to live in the homes they purchase]. This is good news since
these more-traditional buyers will ensure the appreciation trend
will continue over the near future.”
In addition, as long as new construction does not change the
supply/demand balance in favor of excess supply, appreciation should
persist until most of the underwater loans are gone,” Twerdok said.
However, he warned about the potential impacts of continued shifts
in the housing market down the road of the economy’s recovery from
the Great Recession.
“Areas that have benefited from the price bounce may have trouble
once investors exit the market because increased interest rates will
potentially sap buying power,” Twerdok said. “There is also the
unresolved issue of easier credit underwriting and the emergence of
a private securitization market,” which might drive up demand and
cause home values to rise.
“Without certainty, there will likely be more headwinds in the path
of rising home values,” Twerdok said.
A reduction in home foreclosures has also helped reduce the number
of underwater mortgages. The vast majority of foreclosures over the
past five years involved homes that were underwater, and they have
since been sold or rented under new terms with new borrowers, said
Tim Coyle, a senior director with the financial services arm of
LexisNexis Risk Solutions.
“In addition,” Coyle said, ”loss-mitigation departments have been
working with borrowers to do work-outs for things like short sales,
loan modifications, and deed in lieu of foreclosures.”