In what may be the speediest congressional work on a real estate bill in decades, the suspension of the $623 billion National Flood Insurance Program ended abruptly last week.
President Bush signed HR. 11, reauthorizing the program through December 2003, just days after the House and Senate rushed the bill through the legislative hoops in near-record time.
Under the legislation, the flood insurance program was turned back on, with coverage retroactive to Jan. 1. As a result, none of the 4.4 million homeowners insured by the program will suffer any loss because of the laps, according to congressional staff. Some real estate closings scheduled for early January were probably postponed or cancelled as the result of the short-term absence of new flood insurance policies, but federal officials expect the number of such cases was limited.
The insurance crisis was triggered last November, when the lame-duck, post-election Congress departed from Capitol Hill without reauthorizing the program, a mainstay of real estate activity in 20,000-plus flood-prone communties around the country. Though the NFIP has been in existence since 1968 and supplies 95 percent of all flood insurance written on US. properties, it requires periodic reauthorization by Congress to continue funding new policies.
The failure to vote for reauthorization was not on ideological grounds, say congressional staff members, but rather was connected with the overall budgetary strife between Democrats and Republicans that prevailed in both houses at the end of the last congressional session. Most federal departments' budgets were not approved for the new fiscal year starting October 1, 2002, but instead are covered by a blanket reauthorization "continuing resolution" approved by Congress before adjournment. The flood insurance program simply never made it into the continuing resolution.
"It missed the bus, that's all," said one House staff member.
During the lapse in early January, the Federal Emegency Management Agency, which administers the flood insurance program, was not permitted to write new policies or to renew expiring ones where applications had not been received prior to December 31. In effect, that complicated real estate transactions in the 20,000 affected communities, where federal law requires insurance on properties before mortgages can be approved.
In an interview last December, federal insurance and mitigation administrator Anthony S. Lowe, estimated that roughly 400,000 transactions could be affected by even a short lapse in the program. That was the anticipated number of expiring policies and new policy applications that the agency would expect to handle during January. The most directly affected regions included large swaths of the East and Gulf Coast states, extensive portions of the West Coast, plus thousands of inland areas adjacent to rivers, lakes and streams. Resort and second home communties were especially impacted by the lapse.
To avoid a lengthy suspension of the program, a coalition of housing, mortgage and insurance industry groups began lobbying Congress in mid-December to pass a reauthorization bill within the early days of the new session. Prominent among the coalition members were the National Association of Realtors, the National Association of Home Builders, the American Bankers Association, and the Mortgage Bankers Association of America.