Posted on 15 Apr 2010
Democratic senators on Wednesday complained that a lapse in the U.S. flood insurance program had halted new mortgages, as well as emergency loans for small businesses, in flood-prone areas.
Federal authorization for the National Flood Insurance Program ran out on March 28--just as severe storms and flooding caused extensive damage in southern New England.
While those who currently hold flood insurance weren't affected, those who are in the process of applying for insurance won't see their policy come into effect until Congress reauthorizes the program. That means a delay in closings for many, because federally guaranteed mortgages for properties in floodplain areas must be covered by flood insurance.
Senate Democrats are trying to put the blame for that at the feet of their Republican colleagues. Sen. Byron Dorgan (D., N.D.), expressing worries that home buyers are in a state of "limbo and uncertainty," said "we have not gotten even the basic minimal cooperation that you expect from the other side."
The lapse comes as a result of a dispute among Democrats and Republicans in the Senate over how to pay for the flood insurance program and a range of other programs, including jobless benefits and Medicare reimbursement for doctors. Democrats want to label most of $18.1 billion price tag for the programs as "emergency" spending that doesn't require funding offsets, while Republicans have insisted that the cost should be offset.
A vote is likely to occur on the measure by the end of the week.
Small-business disaster assistance is also affected by the lapse in the flood insurance program. Sen. Jack Reed (D., R.I.) told reporters that emergency Small Business Administration loans couldn't be disbursed at the full level unless they were secured by the flood insurance program.
While the limit for loans is ordinarily $2 million, according to Reed, now they are capped at $14,000.
"Frankly, it is a situation where people are not only confused and upset, they're angry," Reed said.