Most NC Homeowners Lack Flood Insurance

Paola Ditto
Settembre 13, 2017

As the floodwaters of Hurricanes Harvey and Irma recede, they may reveal more than moldy drywall and fetid trash.

Though Florida property owners still make up the bulk of federal flood insurance policies in the United States, the AP found that the state's overall flood insurance rate for homes in flood-prone areas is at only 41 percent. Once mortgages were sold to out-of-state financial institutions, homeowners no longer faced pressure to maintain flood insurance.

"Why are we writing flood insurance (policies) for new construction in flood zones?" asks Craig Fugate, who headed the Federal Emergency Management Agency in the Obama administration. It can't be sure, though: FEMA isn't responsible for tracking that kind of data-nor is any other agency.

While the federal government pledges to help many of them rebuild, getting funds can take months, if past hurricanes are any indication.

A major flood can happen anywhere - and to ensure that ME and Mainers are ready for the next one, our elected representatives in Washington should push for spending more on critical initiatives like revising flood risk maps, educating the public about flood risk and helping communities better prepare for storms.

Despite the inability to hedge risk, people continued to move into flood-prone areas. Another goal was to integrate flood insurance with floodplain management, which includes such things as adopting and enforcing stricter building codes, retaining or restoring wetlands to absorb floodwaters and requiring or encouraging homeowners to make their homes more flood-resistant.

"In 2016, they re-drew all the flood maps for Houston", said Sam Craven, owner of Houston-based Senna House Buyers.

Under the NFIP, private insurers wrote the policies, but assumed none of the risk. In flood zones, lenders typically require flood insurance. First, let's cover floods. "And that's not true", said Michelle Osborne, chief deputy commissioner of insurance with the N.C. Department of Insurance. "We should not be losing money every year on flood insurance". President Trump has not stated whether he supports this bill, which was the backing of trade industry groups including NAMB-The Association of Mortgage Professionals and the Mortgage Bankers Association.

"They might take some of the areas that were low risk zones, what we call zone x, and change them to a higher risk zone and that could increase premiums for those people, FEMA gets subsidized by Congress, so Congress can absorb all these losses". About 4 percent of mortgages at Wells Fargo & Co.

And why do homeowner rates and deductibles go up in states that have a disaster? Investigations have shown that federal flood insurance has paid to rebuild some homes - in the same spot - several dozen times. The banks neither admitted nor denied liability.

Now a year later, despite no insurance help, Cole and others have repaired the damage, at tremendous cost in many cases. "After Harvey, we might see a different kind of response".

Two relatively modest storms that hit Houston in 2015 and 2016 - so small they didn't get names - did so much property damage they made the list of the 15 highest-priced floods in USA history. "If you've lost your home and you don't have insurance, that's a good time to walk away from your property", said R.J. Lehmann, an insurance expert at the R Street Institute, a libertarian research organization in Washington.

It is hard to determine exactly how many homeowners have flood insurance. Susan Wachter, a professor of finance at Wharton, says that's true-but it only works if the servicer has the money.

"Servicers may be contractually on the line, but if they don't have the capital, then they can't pay up", Wachter says, adding that taxpayers could be further exposed if clusters of homes default at the same time, reducing the value of houses around them.

In recent years, the number of such policies has been dropping across the country.

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