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Flood insurance program hiatus disrupts home closings

Homebuyers who need flood insurance to close on the purchase of a property in a flood zone are in limbo again.

Congress could not come to terms for extending the National Flood Insurance Program before it went on recess last weekend, forcing the NFIP to stop issuing and renewing policies effective March 28. The hiatus is expected to be short-lived, with Congress taking up the legislation when it returns to session April 12.

For Realtors like Carol Thelen of St. Pete Beach Realty, however, a wait of at least two weeks is exasperating. She knows of at least two closings this week impacted by the delay.

"We're already dealing with the most difficult market anybody has ever seen and then you throw this on top of it?" she said.

"I don't think that a lot of Realtors understand what they're in for until they have a closing that has been disrupted. … As you can imagine, out here on the beach, we definitely need our flood insurance."

This is the third time in recent months that flood program funds have temporarily expired amid political wrangling. The latest round of short-term funding is connected to legislation that also extends a number of programs for the unemployed.

Once Congress authorizes the program again, it's expected to make it retroactive. And the NFIP points out that coverage of existing policies is not affected.

That's of little consolation to Thelen. Delayed closings could well fall through, she said, if buyers cannot get a loan extension or if they walk away because of rising interest rates.

"It's been a struggle to get them this far," she said. "The title companies, the local banks, we're all losing business potentially because of a gross error in judgment."

Standard homeowners insurance policies do not cover flooding.

The flood insurance program, created in 1968, offers coverage from floods associated with hurricanes, overflow of rivers or lakes, rain storms, mudslides and winter melt.

Florida has the seventh-largest number of flood insurance claims in the country.

Jeff Harrington can be reached at or (727) 893-8242.

Flood insurance program hiatus disrupts home closings 03/30/10 [Last modified: Tuesday, March 30, 2010 9:59pm]
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