News & Media

House Funding Bill Extends Flood, Terrorism Insurance

The spending bill extends national flood insurance for nine months and terrorism insurance for seven years and it halts a federal government shutdown at midnight Friday. The bill still needs a Senate vote and Pres. Trump’s signature, both of which are generally expected.

WASHINGTON – The U.S. House of Representatives passed a spending package that will fund the federal government for fiscal year 2020, and it includes a bill that extends the National Flood Insurance Program (NFIP) for nine months – through Sept. 30, 2020.

The measure also helps the real estate industry in several other ways, such as reauthorizing the Terrorism Risk Insurance Program for seven years.

The measure isn’t law yet, however. It now goes to the Senate, which is generally expected to pass it as written, and then to Pres. Donald Trump, who is generally expected to sign it before the Friday deadline.

“Confidence and stability are two of the most critical factors impacting America’s housing market and economy,” says NAR President Vince Malta. “Fortunately, this funding agreement delivers that certainty to NAR’s 1.4 million members and the clients they work hard to serve every day.”

Malta says that NAR “fought to eliminate short-term questions surrounding the status of the National Flood Insurance Program, federal terrorism insurance and various tax provisions, all of which will allow our members to plan better, minimize stress for prospective homebuyers and sellers, and keep our nation’s economy moving forward.”

While the time extensions provide relief for Realtors, homebuyers and sellers, NAR also encouraged Congress to “use the time afforded by this agreement to work toward sustainable, bipartisan solutions to programs like the NFIP, which protect millions of Americans every year.”

Terrorism Risk Insurance Program

NAR says its “scored a major victory, primarily for its commercial members,” with the seven-year reauthorization of the Terrorism Risk Insurance Program (TRIP).

Terrorism risk insurance is often required to secure necessary financing for the thousands of commercial practitioners nationwide, terrorism risk insurance makes it possible to get funding, since it’s required by lenders. Without TRIP, the country would “likely see a repeat of what happened in 2001, when many insurers raised terrorism risk insurance to unsustainable prices or stopped offering coverage entirely,” NAR says.

NAR repeatedly called on Congress to reauthorize TRIP before its scheduled expiration in 2020, publicly supporting Chairwoman Maxine Waters’ Terrorism Risk Insurance Program Reauthorization Act of 2019.

National Flood Insurance Program

A nine-month extension of NFIP’s authority will ensure policies can be issued and renewed through the end of the fiscal year. Without flood policies, many homebuyers looking at properties would not be able to get a mortgage loan since lenders generally require a flood insurance policy before agreeing to lend the money. While private flood policies are growing in the market, they do not yet cover all areas or all homes.

Since the Biggert-Waters Flood Insurance Reform Act expired in 2017, the program has operated on a string of short-term extensions and endured multiple lapses. Each unexpected shutdown puts home sales in jeopardy. According to NAR research, each NFIP lapse threatens 1,300 real estate transactions each day.

NAR has spent the past year supporting the NFIP Reauthorization Act, which includes significant reforms to the program and reauthorizes it for a longer period of time – five-years.

NAR say the Act “strikes a delicate balance between NFIP sustainability and affordability,” and it will continue to work toward a long-term solution that ensures the program is solvent and sustainable moving forward.

Tax extenders

Included in the package are temporary extensions of three tax provisions that directly impact the real estate industry:

  1. the exclusion of forgiven mortgage debt from gross income, meaning that owners of primary residences who had part of their mortgage debt written off (after a short-sale or foreclosure) will not have to pay tax on the amount forgiven
  2. the deductibility of premiums for mortgage insurance
  3. deductibility for cost of improvements to commercial buildings that make them energy efficient

The three provisions all expired at the end of 2017, but the bill extends them retroactive to the beginning of 2018 and through the end of 2020.

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