Congress Extends Homebuyer Tax Credit and Flood Insurance

The U.S. Senate passed two bills last evening previously passed by the House. Both bills still need President Obama's signature to become law, but that's expected to happen quickly.

Homebuyer Tax Credit
The Senate passed HR 5623, which extends the mandatory closing date to qualify for the homebuyer tax credit. The contract deadline does not change - homebuyers must have a contract signed by April 30, 2010 (an exception for active duty military) - but the previous closing deadline of June 30, 2010, has been extended to Sept. 30, 2010. The National Association of Realtors estimates that the approved bill will benefit more than 14,000 deals in Florida.

National Flood Insurance Program
Congress once again reauthorized a short-term extension for the National Flood Insurance Program to Sept. 30, 2010. The bill, HR 5569, makes the program retroactive to May 31, 2010, the date the program went on hiatus.

National Flood Insurance Program Back In Force

Our April 6 Blog Post discussed the problem that has occurred because Congress had recessed without extending authority for the National Flood Insurance Program (NFIP) which expired on March 28, 2010.

As we forecasted, and with the help of the insistence by the National Association of Realtors, Congress approved an extension of the NFIP at the end of last week and President Obama signed it into law within the hour. The change, part of a larger bill that covers unemployment, extends the flood insurance program to May 31, 2010; and coverage is retroactive to March 28 when the current program ran out.

The extension, which needed to be addressed immediately upon Congress coming back into session, will serve as a patch while the larger more comprehensive bill that would extend flood insurance through December 31, 2010.

“In theory, the NFIP will now return to normal operations and, since the extension is also retroactive, any new policy applications or renewals that were signed and submitted during the hiatus will be effective from the date of application (or in the case of waiting periods, the waiting period will start from the date of application),” say officials of the Independent Insurance Agents and Brokers of America.

Closings During NFIP Lapse??? New Guidance Issued

In order for mortgages to be created, lenders rely on federal regulations requiring the existance of flood insurance on the property being closed. The problem has occurred because Congress has recessed without extending authority for the National Flood Insurance Program (NFIP) which expired on March 28, 2010. By law, flood insurance is required for the purchase of real estate in a 100-year floodplain. Most of the property here in Tampa Bay is in a flood plain area.

Insurers may not issue new or renewal policies or increase the coverage of existing policies backed by the NFIP while it's expired. As a result of the National Association's call for action, regulators have issued guidance as to how to close properties during the NFIP lapse. Six of the nation's largest lending authorities have formed a consensus that loan closings may still occur during the NFIP lapse with verification of the submission of a NFIP flood policy application and premium payment submission to the insurance provider.

When Congress returns on April 12, NAR will encourage them to act swiftly to reauthorize and extend the NFIP, and insist that the reauthorization should be made retroactive to March 28, 2010, so that any properties that are flooded during this lapse will be covered by the program.

According to the Governmental Affairs website, FEMA, which administers the NFIP, issued guidance that:

• Existing flood insurance policies that were in effect on March 28 (when NFIP expired) will remain in effect and would not be affected.
• While new flood policies may not be issued after that date, new policies for which payment was received or in case of loan closings, the application was dated on or before March 28 -- will be issued.
• Also renewal policies may not be issued until the NFIP is extended; however, there is a 30-day grace period during which the policy remains in effect following its expiration date.