The Florida Office of Insurance Regulation today announced that State Farm Florida has agreed to continue serving the Florida property insurance market.
Insurance Commissioner Kevin McCarty issued a consent order that resolves pending litigation between State Farm Florida and the Office of Insurance Regulation over the company’s plan to abandon the state’s property insurance market. By the terms of the consent order, State Farm Florida will remain a significant player in the Florida residential property insurance marketplace.
“This agreement is the product of a long and arduous negotiation process,” says McCarty. “The final result is beneficial to the people of the State of Florida, and beneficial to the Florida insurance marketplace. The consent order satisfies the office’s requirements issued in our order dated Feb. 13, 2009, and allows State Farm Florida to remain a viable insurer in the Florida market.”
Under the terms of the consent order, State Farm Florida will drop no more than 125,000 policies. The insurer had 810,416 residential properties in Florida as of October 2009. Even after shedding the 125,000 policies, State Farm Florida should remain the largest private insurer of property in the Florida.
The consent order also grants State Farm a 14.8 percent rate increase for all homeowners’ and condominium unit owners’ policies. The Office of Insurance Regulation says the rate increase approval is based on information provided by State Farm.
The consent order concludes a series of events that began with Florida turning down a State Farm average rate hike request of 67.1 percent on Jan. 27, 2009. A few weeks later, State Farm announced that it would stop insuring property in the state. Recent news reports, however, indicated that the state, and to a lesser extent State Farm, had softened their stance on withdrawal.
“I would say this is a successful resolution of the problem,” McCarty says. “Having State Farm in Florida is better than no State Farm at all. That continues to be our position.”
© 2009 Florida Realtors®
Wednesday, December 16, 2009
Monday, December 14, 2009
Federal help may be on way for homeowners with defective Chinese drywall
The U.S. Department of Housing and Urban Development (HUD) will soon issue guidelines on how homeowners with defective drywall can apply for federal money, according to a letter sent to U.S. Sen. Bill Nelson of Florida.
Department Secretary Shaun Donovan had previously suggested during a trip to Florida that homeowners may be able to find funding under the Community Development Block Grant program.
That program is geared toward helping communities avoid blight by aiding low-income households or areas affected by natural disasters.
However, because the defective drywall problem is unprecedented, affected homeowners who have tried to apply for one of the grants have so far often been met with blank stares. In addition, the grants are generally only given to households below a certain income level, furthering the confusion over whether many of the affected homes in Palm Beach County would be eligible.
However, it appears that the housing department will soon be explaining how affected homeowners may be able to get federal assistance for their tainted drywall problems.
“The guidance will provide details about the eligible activities relating to drywall remediation, and the ways in which (block grant) funds can be used to benefit families with various income levels,” Donovan wrote to Nelson in a letter dated Monday.
“It is my expectation that this guidance will be valuable in helping affected communities and homeowners determine how best to respond to this set of issues,” he continued.
The federal government has received 2,276 complaints of defective drywall from homeowners in 32 states, the District of Columbia and Puerto Rico. More than two-thirds of those complaints are from homeowners in Florida.
The defective drywall gives off a sulfuric gas that is thought to corrode metal components in homes and is blamed by many for health problems. Most of the defective drywall appears to be Chinese-made, although some homeowners have complained of the same problems with domestic wallboard.
Copyright © 2009 The Palm Beach Post, Fla.
Department Secretary Shaun Donovan had previously suggested during a trip to Florida that homeowners may be able to find funding under the Community Development Block Grant program.
That program is geared toward helping communities avoid blight by aiding low-income households or areas affected by natural disasters.
However, because the defective drywall problem is unprecedented, affected homeowners who have tried to apply for one of the grants have so far often been met with blank stares. In addition, the grants are generally only given to households below a certain income level, furthering the confusion over whether many of the affected homes in Palm Beach County would be eligible.
However, it appears that the housing department will soon be explaining how affected homeowners may be able to get federal assistance for their tainted drywall problems.
“The guidance will provide details about the eligible activities relating to drywall remediation, and the ways in which (block grant) funds can be used to benefit families with various income levels,” Donovan wrote to Nelson in a letter dated Monday.
“It is my expectation that this guidance will be valuable in helping affected communities and homeowners determine how best to respond to this set of issues,” he continued.
The federal government has received 2,276 complaints of defective drywall from homeowners in 32 states, the District of Columbia and Puerto Rico. More than two-thirds of those complaints are from homeowners in Florida.
The defective drywall gives off a sulfuric gas that is thought to corrode metal components in homes and is blamed by many for health problems. Most of the defective drywall appears to be Chinese-made, although some homeowners have complained of the same problems with domestic wallboard.
Copyright © 2009 The Palm Beach Post, Fla.
Swimming pools can post a safety and sale problem
According to the Florida Swimming Pool Association (FSPA), the state’s high number of foreclosures has led to new safety problems related to many areas’ swimming pools.
“First and foremost, it’s critical that even abandoned swimming pools maintain adequate barriers to prevent unauthorized access by children,” says Charis Tyson, communications specialist for FSPA. “The Florida Building Code and the ANSI/NSPI Model Building Code call for a fence and/or safety cover.
Many safety measures also keep the pool appealing to potential homebuyers.
“Wherever possible, pools in vacant homes should remain operational, meaning there is adequate circulation and turnover of the water, to avoid water contamination and resulting health hazards,” says Tyson. “This may also help avoid costly damage to the pool, and could help maintain aesthetics and property value. It is well worth the cost. But if it’s not possible to maintain the pool, it should be covered or fenced in some way to prevent access.”
All property owners should follow current swimming pool safety standards.
A link to the statutes regarding pool safety standards is available at: http://www.floridapoolpro.com/industry/news/poolsafetyact.html. The association also offers a search function to find a pool professional searchable by zip code: http://www.floridapoolpro.com/find_pool_pro/locator.asp.
© 2009 Florida Realtors®
“First and foremost, it’s critical that even abandoned swimming pools maintain adequate barriers to prevent unauthorized access by children,” says Charis Tyson, communications specialist for FSPA. “The Florida Building Code and the ANSI/NSPI Model Building Code call for a fence and/or safety cover.
Many safety measures also keep the pool appealing to potential homebuyers.
“Wherever possible, pools in vacant homes should remain operational, meaning there is adequate circulation and turnover of the water, to avoid water contamination and resulting health hazards,” says Tyson. “This may also help avoid costly damage to the pool, and could help maintain aesthetics and property value. It is well worth the cost. But if it’s not possible to maintain the pool, it should be covered or fenced in some way to prevent access.”
All property owners should follow current swimming pool safety standards.
A link to the statutes regarding pool safety standards is available at: http://www.floridapoolpro.com/industry/news/poolsafetyact.html. The association also offers a search function to find a pool professional searchable by zip code: http://www.floridapoolpro.com/find_pool_pro/locator.asp.
© 2009 Florida Realtors®
Thursday, December 10, 2009
New FHA rules a mixed bag for condos
New guidelines from the Federal Housing Administration could increase sales in South Florida’s stalled condo market, making it easier, at least temporarily, to get FHA-backed mortgages.
The guidelines, which went into effect Monday, were written to address current market conditions and the glut of empty condominiums following the real estate bust.
Several of the policies, however, expire in December 2010, leaving some real estate experts to call the changes a mixed bag that will ultimately restrict sales.
Others contend the modifications are overall good for a market suffering from a lack of condominium financing.
Changes include reducing the number of units in a new condominium that must be owner-occupied, allowing condo boards to refuse buyers as long as it doesn’t violate the Fair Housing Act, and cutting the expensive requirement of having an attorney certify condominium documents before a sale.
“Palm Beach will definitely, definitely benefit from this,” said Grant Stern, president of Morningside Mortgage Corporation in Bay Harbor Islands, which does consulting work for developers. “It will allow local buyers to reenter the market with financing on good terms. It will also spur a lot of investor activity when they see the prices starting to creep back up.”
Most banks have shied from condo lending because the units are considered high risk. Those that still lend often want 20 to 30 percent down, a requirement that can eliminate the average buyer.
FHA-backed loans allow for smaller downpayments, but few condos are qualified for that kind of lending.
The Edge condominium at 300 South Australian Ave. in downtown West Palm Beach, which opened in 2007 with 307 units, is the only building in the 33401 area code approved for FHA financing, according to the agency’s Web site.
“Today, a new condo can be more affordable than paying rent, but people can’t buy because they don’t have the downpayment,” said Sarah Mazor, broker at Mazor Realty in Boca Raton, which specializes in new condo sales. “It slows down the market and the people who suffer are the middle class.”
Two big barriers to FHA financing have been a requirement that 51 percent of a condominium be owner-occupied, and a rule banning loans to buildings with “right of first refusal.”
The new temporary guidelines allow for 50 percent of units to be owner-occupied and doesn’t count units that are bank-owned, rented out, or vacant.
Allowing condos with “right of first refusal” access to financing is a permanent change.
Vicki White-Sklark, a government loan specialist with Sun Trust Mortgage in Sunrise, said she’s concerned about how new guidelines that tighten the approval process will ultimately restrict the market.
One change is that no more than 15 percent of total units can be more than 30 days behind on condo association fees.
Also, while other states are now allowed to independently approve FHA mortgages, Florida is still required to have projects submit applications to the U.S. Department of Housing and Urban Development.
“Right now, it’s a moving target,” White-Sklark said, about the guidelines. “I fully expect this to evolve over the next year as they realize the impact it’s going to have on the market.”
Copyright © 2009 The Palm Beach Post, Fla.
The guidelines, which went into effect Monday, were written to address current market conditions and the glut of empty condominiums following the real estate bust.
Several of the policies, however, expire in December 2010, leaving some real estate experts to call the changes a mixed bag that will ultimately restrict sales.
Others contend the modifications are overall good for a market suffering from a lack of condominium financing.
Changes include reducing the number of units in a new condominium that must be owner-occupied, allowing condo boards to refuse buyers as long as it doesn’t violate the Fair Housing Act, and cutting the expensive requirement of having an attorney certify condominium documents before a sale.
“Palm Beach will definitely, definitely benefit from this,” said Grant Stern, president of Morningside Mortgage Corporation in Bay Harbor Islands, which does consulting work for developers. “It will allow local buyers to reenter the market with financing on good terms. It will also spur a lot of investor activity when they see the prices starting to creep back up.”
Most banks have shied from condo lending because the units are considered high risk. Those that still lend often want 20 to 30 percent down, a requirement that can eliminate the average buyer.
FHA-backed loans allow for smaller downpayments, but few condos are qualified for that kind of lending.
The Edge condominium at 300 South Australian Ave. in downtown West Palm Beach, which opened in 2007 with 307 units, is the only building in the 33401 area code approved for FHA financing, according to the agency’s Web site.
“Today, a new condo can be more affordable than paying rent, but people can’t buy because they don’t have the downpayment,” said Sarah Mazor, broker at Mazor Realty in Boca Raton, which specializes in new condo sales. “It slows down the market and the people who suffer are the middle class.”
Two big barriers to FHA financing have been a requirement that 51 percent of a condominium be owner-occupied, and a rule banning loans to buildings with “right of first refusal.”
The new temporary guidelines allow for 50 percent of units to be owner-occupied and doesn’t count units that are bank-owned, rented out, or vacant.
Allowing condos with “right of first refusal” access to financing is a permanent change.
Vicki White-Sklark, a government loan specialist with Sun Trust Mortgage in Sunrise, said she’s concerned about how new guidelines that tighten the approval process will ultimately restrict the market.
One change is that no more than 15 percent of total units can be more than 30 days behind on condo association fees.
Also, while other states are now allowed to independently approve FHA mortgages, Florida is still required to have projects submit applications to the U.S. Department of Housing and Urban Development.
“Right now, it’s a moving target,” White-Sklark said, about the guidelines. “I fully expect this to evolve over the next year as they realize the impact it’s going to have on the market.”
Copyright © 2009 The Palm Beach Post, Fla.
Tuesday, December 8, 2009
Condo rules could shut out buyers, hit builders
New lending rules for condominium buyers are already forcing some developers to change or scrap plans for new projects for fear too many buyers will be shut out.
On Monday, the Federal Housing Administration started limiting the number of buyers in condo buildings that can get loans insured by the agency. The rules also put restrictions on buildings with poor finances, too many delinquent owners and a high number of rentals.
The tighter lending standards are designed to protect the financial health of the FHA. Roughly 18 percent of loans insured by the FHA are either delinquent or in foreclosure, and the agency’s financial cushion has dipped below the federal minimum.
But the move is a blow to condo buyers because the FHA has become a key source of mortgage financing. The agency insures roughly one in four new loans today because buyers need only a 3.5 percent downpayment.
“It is a huge debacle for us,” said Rene Oehlerking, marketing director for Salt Lake City developer Garbett Homes.
The company has canceled a 300-unit condo project, spending $300,000 to redesign it into freestanding homes. Most of the builders’ homes and condos this year went to buyers with FHA loans.
Garbett’s condo project didn’t pencil out with the new FHA rule that allows only half of a condo building’s units to have FHA-backed loans, with some exceptions. That number falls to 30 percent in 2011.
Another new rule requires at least 30 percent of units in new buildings be pre-sold before the agency insures any loans. That number will rise to 50 percent in 2011.
Projects in Florida, where the condo market has been devastated, will require special approval before FHA-backed loans can be made.
“Many of our developers won’t be able to pursue condominium projects because the risk is too great that they won’t be able to sell the units,” said David Ledford, senior vice president for housing finance and land development at the National Association of Home Builders.
Government officials, however, say the rules are necessary to ensure consumers are purchasing units in viable buildings and to help ensure that defaults on condo projects don’t rise too high.
“We believe that we have a balanced policy that is flexible ... yet will help us manage and mitigate the risk,” said Joanne Kuczma, director of the FHA’s home mortgage insurance division.
While the rules could be tough for builders, they will protect consumers because lenders will be forced to be more careful about which projects they fund, said Richard Vetstein, a real estate lawyer in Framingham, Mass.
“On the whole, it’s a good thing,” he said. “Financially sound condominiums make better investments.”
During the housing boom, the FHA was not a big source of condo loans, and the agency had not updated its condominium rules since the mid-1990s. When the new rules were released earlier this year, the lending industry lobbied aggressively to persuade the agency to loosen them.
“We worked very closely with them,” said Tamara King, director of loan origination at the Mortgage Bankers Association. Now that the rules have been relaxed, she said, “for the most part we are in support of the direction that they’re going.”
Critics, however, say the industry’s influence on the process shows that the agency is all too willing to bend to pressure from powerful interest groups, and say the condo loans will be highly prone to default and foreclosure.
“Rather than stopping the foreclosure mess, we’re actually adding more foreclosures to the mix,” said Edward Pinto, a financial consultant and an FHA critic.
For buyers, the new rules cinch already tight mortgage financing. Earlier this year both Fannie Mae and Freddie Mac slapped tighter restrictions on condo loans.
The new FHA rules are “going to create substantial confusion and turmoil,” for mortgage companies that make FHA loans, said Jack McCabe, a real estate researcher in Fort Lauderdale, Fla. “They have to be pulling their hair out right now.”
Copyright © 2009 The Associated Press
On Monday, the Federal Housing Administration started limiting the number of buyers in condo buildings that can get loans insured by the agency. The rules also put restrictions on buildings with poor finances, too many delinquent owners and a high number of rentals.
The tighter lending standards are designed to protect the financial health of the FHA. Roughly 18 percent of loans insured by the FHA are either delinquent or in foreclosure, and the agency’s financial cushion has dipped below the federal minimum.
But the move is a blow to condo buyers because the FHA has become a key source of mortgage financing. The agency insures roughly one in four new loans today because buyers need only a 3.5 percent downpayment.
“It is a huge debacle for us,” said Rene Oehlerking, marketing director for Salt Lake City developer Garbett Homes.
The company has canceled a 300-unit condo project, spending $300,000 to redesign it into freestanding homes. Most of the builders’ homes and condos this year went to buyers with FHA loans.
Garbett’s condo project didn’t pencil out with the new FHA rule that allows only half of a condo building’s units to have FHA-backed loans, with some exceptions. That number falls to 30 percent in 2011.
Another new rule requires at least 30 percent of units in new buildings be pre-sold before the agency insures any loans. That number will rise to 50 percent in 2011.
Projects in Florida, where the condo market has been devastated, will require special approval before FHA-backed loans can be made.
“Many of our developers won’t be able to pursue condominium projects because the risk is too great that they won’t be able to sell the units,” said David Ledford, senior vice president for housing finance and land development at the National Association of Home Builders.
Government officials, however, say the rules are necessary to ensure consumers are purchasing units in viable buildings and to help ensure that defaults on condo projects don’t rise too high.
“We believe that we have a balanced policy that is flexible ... yet will help us manage and mitigate the risk,” said Joanne Kuczma, director of the FHA’s home mortgage insurance division.
While the rules could be tough for builders, they will protect consumers because lenders will be forced to be more careful about which projects they fund, said Richard Vetstein, a real estate lawyer in Framingham, Mass.
“On the whole, it’s a good thing,” he said. “Financially sound condominiums make better investments.”
During the housing boom, the FHA was not a big source of condo loans, and the agency had not updated its condominium rules since the mid-1990s. When the new rules were released earlier this year, the lending industry lobbied aggressively to persuade the agency to loosen them.
“We worked very closely with them,” said Tamara King, director of loan origination at the Mortgage Bankers Association. Now that the rules have been relaxed, she said, “for the most part we are in support of the direction that they’re going.”
Critics, however, say the industry’s influence on the process shows that the agency is all too willing to bend to pressure from powerful interest groups, and say the condo loans will be highly prone to default and foreclosure.
“Rather than stopping the foreclosure mess, we’re actually adding more foreclosures to the mix,” said Edward Pinto, a financial consultant and an FHA critic.
For buyers, the new rules cinch already tight mortgage financing. Earlier this year both Fannie Mae and Freddie Mac slapped tighter restrictions on condo loans.
The new FHA rules are “going to create substantial confusion and turmoil,” for mortgage companies that make FHA loans, said Jack McCabe, a real estate researcher in Fort Lauderdale, Fla. “They have to be pulling their hair out right now.”
Copyright © 2009 The Associated Press
Bennett proposing change to homeowners’ insurance
Sen. Mike Bennett, R-Bradenton, is again proposing what he calls the “Consumer Choice” bill, which he asserts would allow consumers to decide for themselves if they prefer a private home insurer offering market-based rates.
Bennett’s bill is slated for consideration during the spring session of the Florida Legislature.
However, an official representing a consumer group is already questioning whether the bill is meant instead to allow big insurance companies to jack up rates.
“It’s going to raise rates through the roof,” predicted Bill Newton, executive director of the Florida Consumer Action Network. “This is not what people need now. We don’t need staggering rate increases when people don’t even have jobs. The effect is going to be they’re going to be forced to drop their insurance, or go into Citizens (state-run property insurance company).”
The bill would address what Bennett called “the continuing erosion of the competitive private market,” according to information issued by his office.
He noted that the bill had been retooled from last year’s version.
Last year, detractors dubbed a proposal on the same topic “The State Farm Bailout Bill.” Among its critics was Gov. Charlie Crist, who vetoed it, saying it amounted to letting select insurance companies “cherry pick” the most profitable policyholders, while off-loading less desirable customers.
The governor complained it would lead to unaffordable rate increases.
Bennett argued that since the veto, a series of public revelations have made the bill’s passage even more critical.
“This is a change from the 2009 version of the bill, which only applied to about 20 large, financially-strong insurers,” Bennett said. “Opening the bill to all homeowners’ insurers resolves a specific criticism that the 2009 bill might have hurt emerging Florida domestic companies, the small start-up insurers entering Florida’s property insurance market.”
Copyright © 2009 The Bradenton Herald, Fla.
Bennett’s bill is slated for consideration during the spring session of the Florida Legislature.
However, an official representing a consumer group is already questioning whether the bill is meant instead to allow big insurance companies to jack up rates.
“It’s going to raise rates through the roof,” predicted Bill Newton, executive director of the Florida Consumer Action Network. “This is not what people need now. We don’t need staggering rate increases when people don’t even have jobs. The effect is going to be they’re going to be forced to drop their insurance, or go into Citizens (state-run property insurance company).”
The bill would address what Bennett called “the continuing erosion of the competitive private market,” according to information issued by his office.
He noted that the bill had been retooled from last year’s version.
Last year, detractors dubbed a proposal on the same topic “The State Farm Bailout Bill.” Among its critics was Gov. Charlie Crist, who vetoed it, saying it amounted to letting select insurance companies “cherry pick” the most profitable policyholders, while off-loading less desirable customers.
The governor complained it would lead to unaffordable rate increases.
Bennett argued that since the veto, a series of public revelations have made the bill’s passage even more critical.
“This is a change from the 2009 version of the bill, which only applied to about 20 large, financially-strong insurers,” Bennett said. “Opening the bill to all homeowners’ insurers resolves a specific criticism that the 2009 bill might have hurt emerging Florida domestic companies, the small start-up insurers entering Florida’s property insurance market.”
Copyright © 2009 The Bradenton Herald, Fla.
Friday, December 4, 2009
Financial woes for homeowners associations
A recent survey of Florida homeowners associations found them feeling beleaguered and discouraged.
More than 90 percent of the 777 associations surveyed by the Community Association Leadership Lobby say they expect their financial troubles will continue or deepen in 2010.
About 60 percent of survey respondents increased assessments to cover budget shortfalls caused by delinquent owners. And about 66 percent of respondents say there has been an increase in the number of property owners who are more than 60 days late paying fees and assessments.
The results of this survey are likely to support calls for legislation that would allow associations to collect more late fees from investor-owned properties and collect payments directly from tenants renting properties.
Source: Orlando Sentinel, Mary Shanklin (11/23/2009)
© Copyright 2009 INFORMATION, INC.
More than 90 percent of the 777 associations surveyed by the Community Association Leadership Lobby say they expect their financial troubles will continue or deepen in 2010.
About 60 percent of survey respondents increased assessments to cover budget shortfalls caused by delinquent owners. And about 66 percent of respondents say there has been an increase in the number of property owners who are more than 60 days late paying fees and assessments.
The results of this survey are likely to support calls for legislation that would allow associations to collect more late fees from investor-owned properties and collect payments directly from tenants renting properties.
Source: Orlando Sentinel, Mary Shanklin (11/23/2009)
© Copyright 2009 INFORMATION, INC.
Thursday, December 3, 2009
U.S. House passes Buchanan drywall bill
The House on Wednesday passed legislation by a 419-to-1 vote that would help Florida homeowners suffering from toxic Chinese drywall avoid foreclosure.
Rep. Vern Buchanan, R-Sarasota, is an original cosponsor of H. Con. Res. 197, which would encourage banks and mortgage servicers to provide impacted homeowners with temporary forbearance on their mortgage payments.
“Many of my constituents have been forced to leave their homes and pay rent in addition to paying their mortgage,” Buchanan said. “This bill would provide them with some financial relief and help them avoid foreclosure.”
Forbearance is sometimes given to borrowers with temporary financial problems, according to a release from Buchanan’s press office.
The U.S. Consumer Product Safety Commission reported last month that defective Chinese drywall is causing significant damage to Florida homes and posing serious health threats to people living in impacted homes.
The Senate, led by group of senators including Bill Nelson, D-Fla., passed unanimously a similar resolution Nov. 10.
Copyright © 2009 The Bradenton Herald, Fla. Distributed by McClatchy-Tribune Information Services.
Rep. Vern Buchanan, R-Sarasota, is an original cosponsor of H. Con. Res. 197, which would encourage banks and mortgage servicers to provide impacted homeowners with temporary forbearance on their mortgage payments.
“Many of my constituents have been forced to leave their homes and pay rent in addition to paying their mortgage,” Buchanan said. “This bill would provide them with some financial relief and help them avoid foreclosure.”
Forbearance is sometimes given to borrowers with temporary financial problems, according to a release from Buchanan’s press office.
The U.S. Consumer Product Safety Commission reported last month that defective Chinese drywall is causing significant damage to Florida homes and posing serious health threats to people living in impacted homes.
The Senate, led by group of senators including Bill Nelson, D-Fla., passed unanimously a similar resolution Nov. 10.
Copyright © 2009 The Bradenton Herald, Fla. Distributed by McClatchy-Tribune Information Services.
Wednesday, December 2, 2009
Flood insurance program awash in red ink
Federal flood insurance has long been cheap in Florida, at least in comparison to private and state windstorm coverage. That may not last.
With the National Flood Insurance Program running some $17 billion in the red after Hurricane Katrina losses, federal budget watchers have expressed growing concerns about its financial stability and rate structure.
The stakes for Florida, with 2.2 million policies, are considerable.
“It’s called national flood insurance, but in reality if you take Florida and Texas, you’re talking about more than half of the program,” said Erwann Michel-Kerjan, a risk management expert at the Wharton School of Business at the University of Pennsylvania who authored a recent study on the flood rates in Florida.
A Government Accountability Office report in October 2008 singled out FEMA’s policy of grandfathering in older, more vulnerable properties at lower rates, calling it a subsidy that could force taxpayers to again bail out storm victims in another Katrina-like catastrophe. Florida has most of those properties.
FEMA spokesman Clark Stevens said paying down Katrina debts did not factor into a rate hike announced in October. He would not say if the agency was considering annual hikes, capped at 10 percent, or other overhauls.
But congressional panels are pondering options. Among them: Phasing out grandfathering, raising rates for high-risk properties, requiring multiyear policies. Michel-Kerjan said the government could also forgive the Katrina debt.
“It’s a touchy subject. At some point, we will have to make a political decision.”
Copyright © 2009 The Miami Herald,Curtis Morgan
With the National Flood Insurance Program running some $17 billion in the red after Hurricane Katrina losses, federal budget watchers have expressed growing concerns about its financial stability and rate structure.
The stakes for Florida, with 2.2 million policies, are considerable.
“It’s called national flood insurance, but in reality if you take Florida and Texas, you’re talking about more than half of the program,” said Erwann Michel-Kerjan, a risk management expert at the Wharton School of Business at the University of Pennsylvania who authored a recent study on the flood rates in Florida.
A Government Accountability Office report in October 2008 singled out FEMA’s policy of grandfathering in older, more vulnerable properties at lower rates, calling it a subsidy that could force taxpayers to again bail out storm victims in another Katrina-like catastrophe. Florida has most of those properties.
FEMA spokesman Clark Stevens said paying down Katrina debts did not factor into a rate hike announced in October. He would not say if the agency was considering annual hikes, capped at 10 percent, or other overhauls.
But congressional panels are pondering options. Among them: Phasing out grandfathering, raising rates for high-risk properties, requiring multiyear policies. Michel-Kerjan said the government could also forgive the Katrina debt.
“It’s a touchy subject. At some point, we will have to make a political decision.”
Copyright © 2009 The Miami Herald,Curtis Morgan
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