Flood insurance: ‘No win’ for homeowners [Appeal-Democrat, Marysville, Calif.]

March 30--The head of the Federal Emergency Management Agency warned that people who buy federal flood insurance need to plan for big rate hikes. FEMA director Craig Fugate said some people now paying hundreds of dollars a year could wind up paying thousands because Congress says the program must at least pay for itself.

He said the increases will be phased in over three to four years.

In Yuba-Sutter, several flood prone areas require residents to buy flood insurance. If rates increase dramatically, one Yuba County supervisor called it a "no-win" situation for struggling homeowners. We asked politicians, government officials and mortgage lenders what the impact might be if rates skyrocket as Fugate predicts.

Regional flood insurance rates

US Congressman John Garamendi, R-Walnut Grove, said flood insurance rates should be set on a regional basis rather than on a nationwide scale.

"One of the things I am looking into is the regional payout for flood insurance," said Garamendi.

He said California residents have contributed about 30 percent of the premiums nationwide, but receive less benefit than other states.

"This would indicate that California is generally looking at being a major contributor and a net negative receiver," he said. "That would mean that premiums in California are too high.

"We have always argued the need to adjust the rates regionally," he said.

Garamendi acknowledged that it is written into the flood insurance program that it must be self-sustaining, but that Yuba City and Marysville "are spending a pile of money (on levee improvements) to reduce the risk."

As for FEMA director Craig Fugate's comment that rates could climb into the thousands of dollars, Garamendi called it "irresponsible."

"It would force people out of their houses," he said.

Yuba, Marysville concerns

Yuba County Supervisor Roger Abe wondered whether everybody who has benefited from having flood insurance actually paid into it such as the victims of hurricanes Katrina and Sandy.

"If you are going to receive protection, everybody should be paying into the program," Abe said.

He said that increases similar to that described by Fugate could send homeowners into foreclosure.

"People have loans that require them to have flood insurance," Abe said. "If people have to decide to make their house payment or pay flood insurance, it's a no-win situation."

Marysville Mayor Ricky Samayoa noted that ongoing improvements to the Marysville ring levee will make the city safer from floods and make the city more attractive to private enterprise.

But he acknowledged it would be a hardship for some residents.</p>

"I think it is just economics," Samayoa said. "If you don't have the money, I think the decision is pretty easy to make."

Yuba City to curb flood risks

Flood insurance is crucial for Yuba City residents, who live surrounded by levees, said Darin Gale, the city's economic development director.

He said the city, by levee improvements, seeks to reduce the risk floods pose.

"We're doing everything possible to try to minimize that," Gale said.

He added that "any increase in federal flood insurance reduces disposable income of residents."

Real estate agent Lloyd Leighton said a boost in flood insurance rates will likely have more impact on what houses people buy -- and not on whether they buy.

An increase in flood insurance costs from $350 a year to $1,350 a year, for example, would mean that people would buy smaller homes. The median home price in Yuba City is $170,000, Leighton said.

"It's hard to measure," he said of the effect of rising flood insurance rates. "It's hard to know how much."

Yuba-Sutter has flood history

For areas like Sutter County, which carries a reputation for flooding, high flood insurance rates could have a significant impact on residents, said David Tomm, associate civil engineer for the county.

People living in high risk flood areas are already paying upward of $1,400 to $3,000 for flood insurance per year, he said. If the rate went up emphatically, it could force some folks to sell their homes.

"It would be difficult for property owners to pay that," he said.

Flood insurance is mandatory in many places throughout the Sutter County flood basin, Tomm said. However, the completion of the bi-county levee project -- slated to begin construction in July -- would largely eliminate those requirements, or at least keep them from rising detrimentally.

Mortgage lenders predict harder sales

For mortgage lender Ed Bevacqua, branch manager of Evergreen Home Loans in Yuba City, an increase in federal flood insurance rates "would be another government increase that would hinder buyers."

He said with the increase in FHA loans and other related costs, the federal government is making it tougher for home loan borrowers who live in areas where the insurance is mandatory.

"Those areas in floodplans, they are not going to sell. Buyers will live elsewhere. Buyers are going to look more at location," Bevacqua said. "It's going to hurt all the homes in flood plains and make them tougher to sell.

-- Richard Olmsted

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