Flood insurance fiasco looming - FOX 13 News

Flood insurance fiasco looming

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Aaron Davis, owner of the Hillsborough Title Company, confirms an impending deadline cut into his staff's holiday weekend. 

"We had people logging in Saturday and Sunday just to play catch up," Davis said. "For something like this to totally delay or just stack [real estate] closings on the sideline is going to be ridiculous."

The licensed title agent was referring to the May 31st expiration of the National Flood Insurance Program.  Many mortgages in the Tampa Bay area require flood insurance. 

"Here in south Tampa, this whole area's a flood zone," Davis pointed out. "Anything on the waters, close to ponds, lakes, rivers, streams and beach front is affected by flood insurance." 

The national program hit deep red ink in 2008, after Hurricanes Katrina and Rita.  Before that?

"The flood insurance program was actually solvent.  Had plenty of money to pay claims," said Bob Adams of Plant City, a FEMA-certified flood insurance expert, "After that the program became insolvent, had to borrow $18 billion from the treasury in order to pay...claims."

The U.S. Congress has approved short extensions of the program ten times since then:  #11 is scheduled for a vote by the House of Representatives Wednesday, one day before the program expires and two days before the start of the 2012 hurricane season. 

Approval is expected, but it is only for 60 days.

"We need a true long-term solution so that we can stop messing around and move forward," Adams said.

Davis also expects a last-minute reprieve from Congress, but his industry does not expect a long-term solution anytime soon. 

"What we're hearing is, it's politics as usual," Davis said. "The solution is on the table. There's a very clear solution, but typically it's other things getting pushed through on bills."

If the program does expire, existing flood insurance policies will not be renewed.  Nobody knows how lenders would handle that.  For now, they have two ways to handle real estate transactions before the May 31st expiration.  

"They either push them to close earlier, which causes havoc and a mad rush, or they will delay that closing and wait for something that's set in stone," Davis said.

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