The Biggert-Waters Flood Insurance Reform Act of 2012 is quite possibly destroying the American Dream to own a home.
Locally I am investigating several problems with flood insurance that are essentially forcing families in supposed flood zones to pay ridiculously high premiums in order to even be considered for a mortgage. When homeowners are unable to secure a policy the banks have no recourse but to protect their own financial interest.
However, this means the banks take out a new policy on the existing value of the current mortgage, but make the homeowner pay the policy through additional monthly payments in their mortgage. So instead of paying $600 a year for flood insurance, the homeowner might be paying $6,000 a year. The problem is that most of these homes have never flooded, and even if they did, the premium would only cover a fraction of what the home is worth.
If the home did flood, the banks would be paid, not the homeowner, since the estimated value of the home was so under inflated in order to get the policy completed. So the flood insurance premiums that the supposed homeowners are paying have nothing to do with actual flood insurance. FEMA directs how all of this takes place in flood zones and changed the rules. In order for homeowners to get a preferred rate, an elevation certification that can cost up to $2,000 must be purchased. When a homeowner can’t afford this certificate, rates on the flood policy skyrocket, making this entire process flawed. Only FEMA regulates these rates.
Now imagine this scenario: an elderly couple tries to sell their house. Who is going to buy a home knowing the unjust requirements for flood insurance in areas that never flood? The original homeowners are trapped. They can’t sell, they can’t afford the mortgage, and they are paying flood insurance premiums that will never really ensure their ability to protect their home. The end result is foreclosure. The Biggert-Waters Flood Insurance Reform Act of 2012 — whether intended or not — is a direct attack on the working poor and middle class.
People who want to own a house will do almost anything to call it their home. They will even pay unnecessary and in many cases flawed premiums, just so the banks can prepare a mortgage and get them moved in. Bottom line: if this dress rehearsal legislation continues, the American dream of owning a home will be predicated upon practices beneath the standards of our nation that once echoed, “Give me your tired, your poor, your huddled masses yearning to breathe free.”