The recent article in the Sun-Gazette, although it sheds some light on the current dilemma of flood insurance, does not give an overview of the dilemma realtors, buyers, sellers and lenders are facing in the West Branch Valley.
One of our members, Melanie McLane, recently did a Webinar. Key points from that include the following:
The law, as passed seeks to do three things:
Fill the “hole” of $24 billion that the National Flood Insurance Program is in debt from previous storms
Add 1 percent per year to a National Flood Insurance Reserve Fund.
Make the NFIP “actuarially sound” by having premium payments which reflect the true risk of ownership in the flood plain.
All of these intentions are good; it is the consequences which are awful. The bill called for FEMA to perform an “affordability study”, which was never done because the time frame allowed for this was too short. However, Congress could have simply divided the amount of the deficit in this program ($24 billion) by the number of flood insurance policy holder ($5.6 million) and come up with the amount of $4285 per policy holder.
Additionally, the affordability study was not only never completed, no guidelines were ever issued for it. We think that an affordability study on flood insurance should include the median price of a house in an area, and the median income in the area. A premium of $13,500 per year for a property worth $80,000 is beyond affordable and reasonable.
Across the county, our members are reporting lost sales due to the high premiums. Even those sellers obtaining elevation certificates are finding the quotes are so high that buyers are scared away.
Unsaleable properties are trapping sellers into either keeping their house.or walking away. A strong concern among local lenders is what will happen if these owners default. The banks will then have an unsaleable property on their hands.
The way the law was crafted, property owners are repaying the debt accumulated over decades. Some of those owners have never been through a flood, and have never received any FEMA or NFIP aid. However, they are paying back the aid that was paid to previous owners – who are not contributing at all to this deficit.
We urge our elected officials to make this problem a number one priority for our county, as it affects our real estate market severely. Although it is correct that countywide only 10 percent of the properties are affected, certain communities, like Muncy and Jersey Shore, have almost half of their taxable parcels affected by flood plain. If owners go into default, and the lenders foreclose and sell these properties for a small percentage of their assessed value, you can anticipate that tax appeals will be filed regarding the assessed value.
That will lead to the tax base being severely eroded. So, this problem is everyone’s problem, whether you live in the flood plain or not. As an association, we would also urge our fellow citizens to contact their elected federal representatives and tell them we need to fix this law.
Cami A. Rooney
West Branch Valley Association of Realtors
Submitted by Virtual Newsroom