Congress' failure to extend flood insurance dams up house closings

Congress' failure to extend the National Flood Insurance Program this month again has delayed closings for homebuyers in Beaufort County and across the nation.

The program expired June 1, the beginning of the 2010 hurricane season.

This is the third time Congress has allowed the program -- which provides federally backed and affordable flood insurance coverage for millions of American homes and businesses -- to lapse this year.

The National Association of Mutual Insurance Companies estimates that for each day the program remains in limbo, about 1,400 closings for home purchases are delayed.

Banks require flood insurance for many homes in flood-prone areas of Beaufort County, including the majority of Hilton Head Island and other barrier islands. The insurance also is required for many homes on the mainland.

Derek Gilbert of Gilbert Law Firm in Beaufort said his firm has about a half-dozen closings on hold until the flood insurance program is reauthorized.

"A lot of lenders will not close on their loans if you are without flood insurance and you're in a flood zone," he said.

He said buyers and sellers are frustrated, but expect the delay won't last much longer. He doesn't, however,expect sales to fall through as a result of the lapse.

"At this point, everyone is just waiting," he said.

Until it is reauthorized, the program cannot issue new policies, increase coverage or approve renewal policies for applications dated after May 31. Some policies can be transferred to new owners, but lenders have refused to close loans on properties that could not obtain the insurance before the end of May.

The U.S. House of Representatives has passed two bills that would extend the program.

One attempt included reauthorization of the program through December in a controversial, larger bill that also addresses unemployment benefits and tax breaks. That bill has yet to pass the Senate.

A separate bill approved by the House on Wednesday would extend the program until Sept. 30. That bill now moves to the Senate.

Charles Sampson, president of the Hilton Head Area Association of Realtors, said though he personally doesn't know anyone who hasn't been able to close a sale as a result of lapse, local Realtors are concerned. The slowly recovering housing market doesn't need another hurdle in its way, Sampson said.

"We don't even need a bump in the road," he said.