Flood Insurance price increase (Sarasota: subsidized, property taxes, living in)

[MartyGras]

Because I have a mortgage I have to have full flood insurance, when I make the final move to PG I will reduce my coverage to maybe $50,000 that would reduce my premium to about $460 per year from $2300.

For $50K if I ever flood I can do the work myself easily.

[yellowsky]

Just when you think it can't get worse:

This from the Boston Business Journal

"The government may be at a standstill, but federal bank regulators are pushing ahead with preparations for the implementation of a controversial flood insurance law that passed last year with the unanimous support of Massachusetts’ congressional delegation. The plan, hatched by the U.S. Department of the Treasury, the Federal Deposit Insurance Corp. and three other federal regulators, amended prior regulations to allow banks to force homeowners to buy flood insurance. Under that provision, regulators would enable banks to “force-place” flood insurance when a borrower’s policy lapses. Typically, force-placed insurance policies are paid upfront by the lender, and then added to the loan balance.
In the past, force-placed policies were known as petri dishes of graft and fraud that enabled some unscrupulous lenders to practice a kickback scheme in which they allowed one force-placed policy lapse and replace it with another, more expensive force-placed policy and get a kickback from the insurance company selling the more expensive policy.
Some lenders also were accused of backdating force-placed policies in order to help insurance companies collect more premiums.
The regulators’ proposal also includes several other provisions advocated by the American Bankers Association. Those items include allowing lenders not to escrow premiums under certain conditions and excluding second liens from escrow requirements."

[MartyGras]

I don't see anything new above , here us what the 1996 law says

Forced Placement Requirements
The Reform Act does not require an institution to monitor for map changes, and the final rule does not require that determinations be made at any time other than when a loan is made, increased, extended, or renewed. If, however, at any time during the life of the loan the institution or its servicer determines that required flood insurance is deficient, the final rule requires initiation of forced placement procedures.
The Reform Act imposed the requirement on an institution or a servicer acting on its behalf to purchase or “force place” flood insurance for the borrower if the institution or the servicer determines that coverage is lacking. The final rule, therefore, provides that an institution, or servicer acting on its behalf, upon discovering that security property is not covered by an adequate amount of flood insurance, must, after providing notice and an opportunity for the borrower to obtain the necessary amount of flood insurance, purchase flood insurance in the appropriate amount on the borrower’s behalf.

Gary

[MartyGras]

I just found something interesting in the law

"Flood insurance coverage under the Act is limited to the overall value of the property securing the designated loan minus the value of the land on which the property is located."

I'm sure many people by this definition are over insured. If for instance your mortgage is $250k but the land value is $100k you are only required to have $150k of coverage,

Gary

[MikMal]

I see in today's news that Florida has filed a "Friend of the court" brief that backs Mississippi's lawsuit against the Feds in regards to flood insurance: Fla. backs lawsuit over flood insurance hikes - Sarasota News | Mysuncoast.com and ABC 7: State

[yellowsky]

Originally Posted by MartyGras

I don't see anything new above , here us what the 1996 law says

Forced Placement Requirements
The Reform Act does not require an institution to monitor for map changes, and the final rule does not require that determinations be made at any time other than when a loan is made, increased, extended, or renewed. If, however, at any time during the life of the loan the institution or its servicer determines that required flood insurance is deficient, the final rule requires initiation of forced placement procedures.
The Reform Act imposed the requirement on an institution or a servicer acting on its behalf to purchase or “force place” flood insurance for the borrower if the institution or the servicer determines that coverage is lacking. The final rule, therefore, provides that an institution, or servicer acting on its behalf, upon discovering that security property is not covered by an adequate amount of flood insurance, must, after providing notice and an opportunity for the borrower to obtain the necessary amount of flood insurance, purchase flood insurance in the appropriate amount on the borrower’s behalf.

Gary

I believe the article, excerpted by me, was saying that the new, unsubsidized rates for flood insurance, would be difficult to impossible for the mortgage holders to pay and therefore the lenders would be in a position to “force-place” flood insurance. This could lead to the potential for fraud.
It is not so difficult for the mortgage holder to pay the lower subsidized rates but when the amounts get into the high thousands the mortgagee will be hard pressed to come up with the funds every year.

[SandyJet]

My 28 year old neighbor who bought a first time house that never had flood insurance a few weeks before Sandy paid his $380 PRP policy at closing and a few weeks later collected 145K. NFIP does not have reserve funds so he got $144,620 hand out from NFIP that needs to be made up by other rate payers.

My other neighbor a widow who bought house in 1955 and paid almost 60 years worth of property tax did not have flood insurance and got a tax payer check for $31,900 from FEMA. Disaster relief checks do not come from flood insurance money.

Things are not black and white. Then insult to injury the widow was required to take flood insurance and since they dont have reserve they immediately took her check and gave it to folks with flood to pay repairs.

Flood is normally by me set at 1/3 of risk on pre-firm houses. Everyone who got a 100K check in sandy with Flood only should have got 33,333.

[SandyJet]

Originally Posted by MartyGras

My heart goes out to the people who have suffered through sandy and I don't want to sound cruel but what I am reading here is that there are people that had houses in flood zones without insurance and took the risk upon themselves. They accepted charity from the government and have complaints about the strings attached.

But if you had insurance things went much smoother.

I'm having a hard time with this, I pay flood insurance (full rate) and that money and more is used to bail out people who are uninsured.

The law should require that all properties in flood zones carry insurance no exceptions.

Think of it like automobile insurance, the law requires every car to be insured because if the decision were left to the individual too many would go uninsured.

Ill bet if everyone in a flood zone had been required to carry insurance the rates would be a lot lower and we wouldn't be having this discussion



Gary

However, after Katrina in New Orleans where very few folks had proper flood insurance the folks with flood were rooting and begging the US to give grants to the uninsured.

Originally they were dancing while nieghbors were crying as they knew they were getting a free mcmansion raised up to protect from flood waters. But quickly realized a beautiful house on an abandoned block full of moldy deserted homes where the nearby hospitals, schools and fire departments are destroyed is worthless.

Long Beach NY I will use as an example. NYS is not helping rental properties, stores and people without flood rebuild and FEMA is helping rebuild hospitals, schools, fire departments and boardwalk.

I found it funny the folks with flood back last fall and spring quickly raising houses, adding additions and building new homes. But by Summer realizing they built a mansion in the ghetto.

Right now as of today, town lost its movie theater, Gym, Hospital, Half the Boardwalk is missing and in one part of town 1/3 of homes are abandoned and now homeless folks and vandals are moving in.

They could be smug and say no soup for you uninsured. But in reality rooting for the bankruptcy of neighbors and living in a mansion in a war zone you lose too.

[Travelassie]

Originally Posted by yellowsky

Just when you think it can't get worse:

This from the Boston Business Journal

"The government may be at a standstill, but federal bank regulators are pushing ahead with preparations for the implementation of a controversial flood insurance law that passed last year with the unanimous support of Massachusetts’ congressional delegation. The plan, hatched by the U.S. Department of the Treasury, the Federal Deposit Insurance Corp. and three other federal regulators, amended prior regulations to allow banks to force homeowners to buy flood insurance. Under that provision, regulators would enable banks to “force-place” flood insurance when a borrower’s policy lapses. Typically, force-placed insurance policies are paid upfront by the lender, and then added to the loan balance.
In the past, force-placed policies were known as petri dishes of graft and fraud that enabled some unscrupulous lenders to practice a kickback scheme in which they allowed one force-placed policy lapse and replace it with another, more expensive force-placed policy and get a kickback from the insurance company selling the more expensive policy.
Some lenders also were accused of backdating force-placed policies in order to help insurance companies collect more premiums.
The regulators’ proposal also includes several other provisions advocated by the American Bankers Association. Those items include allowing lenders not to escrow premiums under certain conditions and excluding second liens from escrow requirements."

Mortgage companies do that now for homeowner's insurance. I'm surprised they don't already do it for flood insurance, or perhaps they do. The difference would be, I believe, that flood insurance policies come from FEMA, and the rates are the same for a given property regardless of where the policy comes from, an insurance agent selected by the homeowner, or a company selected by the mortgage company. Unless, of course (and I wouldn't put this past either the lender or the guv'mint), there are penalties and surcharges tacked on that flood insurance by the lender.

I see more foreclosures in the future when people just can't pay those increased insurance rates.

[yellowsky]

According to the Tampa Bay Times this 'force place' policy for flood insurance is a rule change.

'Federal regulators suggest banks be required to accept private flood insurance'

"Federal regulators are wading into the flood insurance crisis, suggesting banks be required to accept private flood insurance on homes in high-risk areas.
The proposed rule change filed Friday was mandated as part of the Biggert-Waters Act, the same 2012 law that is causing huge flood insurance rate hikes for some. It comes at the same time Florida insurance regulators are investigating how the state could induce private companies to sell flood insurance.

If the federal change is approved, banks and other lenders would have to accept qualified private insurance on loans backed by properties in areas at risk for flooding. Lenders would also have to place in escrow flood insurance payments for certain residential properties and for mobile homes. The rule clarifies that lenders have authority to charge a borrower for the cost of force-placed flood insurance when a property owners fails to get the coverage.

The change in flood insurance rules would be unified for lenders on both the national and state level.

The new rules were jointly proposed Friday by five regulatory agencies: the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the National Credit Union Administration and the Farm Credit Administration.

The public has until Dec. 10 to review and comment on the proposal.

The Biggert-Waters Act calls for stabilizing the national flood program by eliminating subsidies on older homes in flood zones. In some cases, the subsidizes are being phased out gradually with annual rate increases near 20 percent.

In certain instances, like the sale of a property, the subsidy is being eliminated immediately beginning with renewals this month. That has triggered complaints from homeowners who have seen their annual flood insurance premiums spike from the $2,000 range to $14,000 or more in some cases."