Homeowners also have the option to buy flood insurance policies from private insurance companies.
Previously the National Insurance Flood Program subsidized annual insurance premiums for owners of property in high risk flood zones. The enormous cost of Hurricane Sandy estimated at between 30 and 50 billion dollars by risk management consultancy firm Eqecat, has left the NIFP with a debt of over 25 billion too be picked up by taxpayers.
In 2012 US congress passed a new flood insurance reform act – the “Biggert-Waters Flood Insurance Reform Act 2012″ (BW-12 ) which will see subsidies for Flood insurance abolished and home owners in flood zones are now facing a massive hike in their flood insurance premiums in some cases to over $30,000. These premiums will be compulsory even if the homeowner is unable to pay and if not paid the homeowner will immediately be in breach of their mortgage conditions and face foreclosure.
As a borrower in a high – risk flood zone your are legally obliged to purchase adequate flood insurance – if you do not the lender can buy it and add onto the mortgage loan as an additional ” force placed” fee.
FORCE PLACED FLOOD INSURANCE POLICIES
Under federal law, lenders using federally-backed mortgage insurance cannot offer mortgages on property in areas of high flood risk unless the borrowers obtain flood insurance from the National Flood Insurance Program. The flood insurance most be for the life of the loan and if a borrower lapses the flood insurance the lender can force the borrower to pay the cost. However, the borrower has a right to obtain a flood insurance policy at the lowest cost as long as the policy covers the amount of the loan.
Forced placed flood insurance policies are usually much higher and can cost up to 10 times more than other policies . For some homeowners the high flood insurance premiums have left them unable to meet their monthly mortgage payments and they have fallen into arrears.
The bank of America together with other banks and mortgage providers are now facing lawsuits – if you are a mortgage holder who has been forced to pay a flood insurance premium you think was excessive or unnecessary you may also be able to participate in a forced placed flood insurance lawsuit – check out forced-placed-flood-insurance for free advice on your individual case.