Flood Insurance

A friend of mine, Joe Jaynes, recently published an article regarding the ins and outs of flood insurance. Please take a few minutes to read the article and educate yourself on this very important information. Georgia residents found out recently that flood insurance is extremely important. Joe is the President of J & A Insurance Agency and is an all around great guy. Should you need further information, please contact him at 678-266-3353.


THE IMPORTANCE OF OBTAINING FLOOD INSURANCE COVERAGE

BACKGROUND

Because of frequent flooding of the Mississippi River during the 1960s and the rising cost of taxpayer funded disaster relief for flood victims, in 1968 Congress created the National Flood Insurance Program (NFIP). It has three mandates: to provide residential and commercial insurance coverage for flood damage, to improve floodplain management and to develop maps of flood hazard zones.While the comprehensive section of an auto insurance policy covers flood damage to vehicles, there is no coverage for flooding in standard homeowners, renters or commercial property insurance policies. It is available in a separate policy from the NFIP and from a few private insurers. Despite efforts to publicize this, many people exposed to the risk of floods still fail to purchase flood insurance.

Legislation was enacted in 1994 to tighten enforcement of flood insurance requirements. Regulators can now fine banks with a pattern of failure to enforce the law and lenders can purchase flood insurance on behalf of homeowners who fail to buy it themselves, then bill them for coverage. The law includes a provision that denies federal disaster aid to people who have been flooded twice and have failed to purchase insurance after the first flood.Buildings constructed in a floodplain after a community has met regulations must conform to elevation requirements. When repair, reconstruction or improvement to an older building equals or exceeds 50 percent of its market value, the structure must be updated to conform to current building codes. A 2007 NFIP study on the benefits of elevating buildings showed that due to significantly lower premiums homeowners can usually recover the higher construction costs in less than five years for homes built in a "velocity" zone, where the structure is likely to be subject to wave damage, and in five to 15 years in a standard flood zone. The Federal Emergency Management Agency (FEMA) estimates that buildings constructed to NFIP standards suffer about 80 percent less damage annually that those not built in compliance.

HOW IT WORKS

The NFIP is administered by FEMA, now part of the Department of Homeland Security. Flood insurance was initially only available through insurance agents who dealt directly with the federal program. The "direct" policy program has been supplemented since 1983 with a private/public cooperative arrangement, known as "Write Your Own," through which a pool of insurance companies issue policies and adjust flood claims on behalf of the federal government under their own names, charging the same premium as the direct program. Participating insurers receive an expense allowance for policies written and claims processed. The federal government retains responsibility for underwriting losses. Today, most policies are issued through the Write-Your-Own program but some non federally backed coverage is available from the private market.

As with other types of insurance, rates for flood insurance are based on the degree of risk. FEMA assesses flood risk for all the participating communities, resulting in the publication of thousands of individual flood rate maps. High-risk areas are known as Special Flood Hazard Areas or SFHAs.

People tend to underestimate the risk of flooding. The highest-risk areas (Zone A) have an annual flood risk of 1 percent and a 26 percent chance of flooding over the lifetime of a 30-year mortgage, compared with a 9 percent risk of fire over the same period. In addition, people who live in areas adjacent to high-risk zones may still be exposed to floods on occasion. Ninety percent of all natural disasters in this country involve flooding, the NFIP says. Since the inception of the federal program, some 25 to 30 percent of all paid losses were for damage in areas not officially designated at the time of loss as special flood hazard areas. NFIP coverage is available outside high-risk zones at a lower premium.

Flood insurance covers direct physical losses by flood and losses resulting from flood-related erosion caused by heavy or prolonged rain, coastal storm surge, snow melt, blocked storm drainage systems, levee dam failure or other similar causes. To be considered a flood, waters must cover at least two acres or affect two properties. Homes are covered for up to $250,000 on a replacement cost basis and the contents for up to $100,000 on an actual cash value basis. Replacement cost coverage pays to rebuild the structure as it was before the damage. Actual cash value is replacement cost minus the depreciation in value that occurs over time. (Excess flood insurance is available in all risk zones from some private insurers for NFIP policyholders who want additional coverage or where the homeowners community does not participate in the NFIP.) Coverage for the contents of basements is limited. Coverage limits for commercial property are $500,000 for the structure and another $500,000 for its contents.

Mortgage Rates Remain Low!

Mortgage Rates for residential loans remained low last week. But buyer beware...they will not stay low forever. The Fed is keeping it's plan going of buying mortgage backed securities and the effect of this is keeping mortgage rates low throughout the country. The plan of purchasing these securities is expected to end at the end of this year. However, it has has been rumoured to be extended and it has been rumoured to end early. I guarantee you that when the Fed stops buying rates will rise.

If you are currently in the market to buy a new home, you have picked the best time in years to do so. Not only are rates extremely low, but home prices are very attractive. Now is the time to act.


Chuck Walden
cwalden@signaturelendinggroup.net

We have moved!

During the month of August, Signature Lending Group moved to a new location. Due to our expansion, we needed more offices and more conference room space. Gibraltar Executive Suites in Dacula has been a match made in heaven. The only negative thoughout this process has been the phones. We were not able to "port" our numbers to our new location so that has changed also. Please be patient as we are still working out the kinks. Our new information is as follows:

2078 Teron Trace
Suite 250
Dacula, GA 30019

Phone: 678-804-6030

Thanks for trusting us with your referrals!

Small Business Loans

Needless to say, small business is under extreme financial stress. The wise business owner has trimmed expenses, yet sales and income continue to decline. Small business owners have gone to their banks for help and may have encountered a flat "no" after walking through the door. For many small businesses, a Small Business Administration (SBA) loan is the best choice to meet their needs.

SBA loans are mainly used for three purposes:

1) Consolidate business debt - if consolidation of numerous business debts will save the business money and increase cash flow, you should explore using the SBA.
2) Purchase an existing business - this can be to purchase the business or the business and the building. This program is great for owners looking to expand their market with a discounted acquisition.
3) Purchase a franchise - the SBA is very active in providing individuals or companies the funding to purchase a franchise. Also, it should be noted that these funds can be used for everything involved in opening the business.

Crown Funding Group has many SBA products available to help small businesses. Give us a call and we can help you get the funding you need.

Georgia Housing Tax Credit Bill

Today, House Bill 261 was signed by Governor Sonny Perdue. This bill provides an $1800 tax credit which would be taken over three years. This bill is immediately in effect and is meant to spur the housing market. The amount of the credit will either be $1800 or 1.2 percent of the purchase price (whichever is less).

If you are a first time home buyer, this tax credit would be in addition to the $8000 federal credit. Eligible properties include single family residences including condos, previously occupied homes that were listed for sale before May 11, 2009 and are still listed, and bank owned properties. The bill did not include investment properties.

The goal of this bill is obviously to provide an incentive to move current inventory and to get would be home buyers back in the game. If you, or anyone you know, are ready to purchase a home, Signature Lending Group would love an opportunity to earn your business and to help you take advantage of the new tax savings. We are more than willing to hold your hand throughout the entire process. Call us anytime at 678-387-5580.

Earth Clean Up Day

In support of Earth Clean Up Day, the Dacula Hamilton Mill Kiwanis Club will be partnering with the Dacula High School Key Club to clean two miles of road on Saturday April 25th. Don't be surprised to see a bunch of smiling faces along the side of the road!

In case you were wondering, Kiwanis is an international organization that changes communities on child at a time. The Dacula Hamilton Mill Kiwanis Club has been an active chapter for two years and is going strong. If helping children or serving the needs of others is something you are interested in, please don't hesitate to contact me anytime.

Window of Opportunity

In recent months, I have been talking to you about the “window of opportunity” when it comes to mortgage lending. As I type this post, rates are within a half a point of the lowest rates in country’s history. If you have been sitting on the fence waiting for 4% interest rates, here are a few items to be mindful of:
1) I have reviewed key components of Obama’s Stimulus Package - and nothing in the plan guarantees 4% mortgage interest rates the media keeps talking about. In fact, as Fed Chairman Ben Bernacke alluded in his March 15th “60 Minutes” interview, the Fed’s long term plan is to raise rates as the economy shows signs of recovery.
2) Lenders are continuing to tighten guidelines, which means:
a) Credit scores needed to qualify have increased significantly in the last 30 days. I expect this trend to continue.
b) Many lenders are asking borrowers for larger down payments than in recent years. Fortunately, Signature Lending Group is still offering programs with as little as 3.5% down on FHA loans.

Again, my message here is that we are very likely entering the late stages of our “window of opportunity”. If you or someone you know are wondering if the time is right to purchase a new home or refinance an existing one, please call me immediately. I promise to give you the straight answers that will help you make the most of these chaotic economic times.

Chuck Walden, President
Signature Lending Group, Inc
678-387-5580