Like many homeowners, Kurt Petersen has to pay his property taxes and insurance premiums through an escrow account required by his mortgage company. Those costs are built into his monthly mortgage payment.
But in the process of refinancing in 2012, something went wrong.
"I went about ten months without flood insurance and it was supposed to be paid through the escrow," Petersen said. That required a new flood insurance policy, and under the Biggert-Waters Act, at a much higher price.
"I got stuck with an increase in my [flood] insurance from about $2,000 to what my insurance agent thinks is going to be about $8,000 a year," Petersen said.
If the policy had not lapsed, the premium would still increase 20 percent per year, but it would take several years to reach the newly-required, non-subsidized price.
The difference between stair step increases and the immediate increase could add up to $50,000, according to Petersen's calculations, and there is reason to believe he is good with numbers: he is a banker, who now has to turn to another professional.
"I've already engaged an attorney, so he's looking into this right now," Petersen said.
Attorney Ian Leavengood said his initial review suggests "There's no negligence. Mr. Petersen has performed exactly how he was supposed to perform, and now he's at least potentially facing damage."
Leavengood is hopeful either the National Flood Insurance Program will agree Petersen did not intentionally allow his policy to lapse, or the escrow agent will absorb the costly error.
In either case, "Consumers just need to be very diligent," Leavengood advised. "They need to try to understand what this law means. You can't afford to let your flood policy lapse."
Petersen's case also illustrates how the flood insurance reforms impact local economies. The higher premium will cost him about $500 a month. "It means I'm not buying a new car," Petersen said. "I have a 1996 and a 2000, and one of them's gotta go soon."
FOX 13 / WTVT-TV
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