THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, January 8, 1995 TAG: 9501050184
SECTION: CAROLINA COAST PAGE: 13 EDITION: FINAL
COLUMN: Real Estate
SOURCE: Chris Kidder
LENGTH: Medium: 97 lines
We must be feeling pretty lucky about the weather these days. I've lost count of how many storms have taken aim at the Outer Banks in recent years, only to veer off for some less fortunate locale.
Family and friends who live inland equate coastal storms with nuclear holocaust; they see living on barrier islands as foolhardy and dangerous. Even so, they've stopped calling every time The Weather Channel announces our imminent destruction.
They no longer panic with every network clip of a wind-whipped reporter standing on the beach amid houses collapsing in the surf.
And even though we should know better, every time a storm doesn't hit, we become more complacent, more certain that we'll be spared, less motivated to take measures to protect ourselves and our property.
The federal government created the National Flood Insurance Program in 1968 in part as a way to force us to take care of ourselves. Flood insurance is available only to residents of communities that implement government land-use planning and flood management guidelines. The program is administered by the Federal Emergency Management Agency.
After massive claim outlays from hurricanes Hugo, Andrew and the 1993 riverine flooding in the Midwest, the program was technically insolvent.
The flood insurance program has never been popular with taxpayers who don't need it. In fact, it hasn't been all that popular with taxpayers who do need it: Only 17 percent of homes in flood hazard areas are covered by NFIP.
Running on borrowed funds is business-as-usual for other government programs, but FEMA had insisted for years that NFIP was self-supporting. On paper, with more than 65 percent of eligible homeowners participating, it was.
Last year, amid a lot of finger pointing and breast beating, Congress passed the National Flood Insurance Reform Act of 1994. The reforms were aimed, in part, at bringing financial expectations in line with reality.
Some of the act's provisions, which became effective last Sept. 22, will have a direct impact on Outer Banks homeowners.
The new legislation forces more participation by mandating NFIP coverage for any federally involved loan involving property in a special flood hazard area.
Under the old program lenders required flood insurance, but there was no provision for requiring borrowers to keep it. Nationwide, most borrowers - especially those in non-coastal flood areas - dropped the coverage after a year or two.
Now lenders will be required to escrow flood insurance payments if they escrow other payments. Flood insurance must be in effect for a loan to be extended or renewed.
The waiting period for NFIP coverage has been increased from five to 30 days, except for first-time purchases for mortgage loans or in connection with flood map changes.
The reform repeals the Upton-Jones Amendment which allowed payment of claims for demolishing or relocating NFIP-insured houses in imminent danger of collapse from erosion. Claims can be filed under Upton-Jones through next Sept. 22.
Between its implementation in 1988 and last February, 481 claims were filed under Upton-Jones by coastal homeowners. North Carolinians filed 257 of those, receiving $11.8 million in compensation.
(Massachusetts was the next largest beneficiary with 44 claims totaling $1.9 million.)
In drafting Upton-Jones, Congress expected homeowners to move their houses, says Ed Welch, an administrative aide to U.S. Rep. Martin Lancaster. Instead, most claims were for demolition, the most expensive option (demolition claims average $68,000; relocation claims, $32,500).
But Upton-Jones never made a dent in removing threatened structures. According to local officials, few homeowners were interested in giving up their oceanfront homes until nature gave them no choice.
Most had no land for relocation and the rest figured they'd collect when - and if - their houses fell in the ocean.
``I have friends who own oceanfront property,'' says Kitty Hawk building inspector Dan Smith. ``The last thing they want to talk about is demolishing it.''
Ineffective and smacking of pork barrel, Upton-Jones was doomed after its namesake, N.C. 3rd District Rep. Walter Jones Sr., died.
``State and county folks liked the old program,'' says Welch, who had worked for Jones when the amendment was drafted. ``But it wasn't consistent with FEMA's idea of insurance because you paid before the casualty occurred.''
The Reform Act directs FEMA to institute a flood mitigation grant program with state and local governments picking up 25 percent of the tab. The program hasn't been developed because Congress hasn't funded it yet.
No one knows what the program will be, says Welch, but ``it's certain that it won't be as favorable for individual homeowners.''
Next week, we'll look at how erosion-threatened homeowners can still benefit from Upton-Jones and at insurance options available for homes not covered by NFIP. MEMO: Chris Kidder covers Outer Banks real estate for The Carolina Coast. Send
comments and questions to her at P.O. Box 10, Nags Head, N.C. 27959.
by CNB