An extension was granted to the National Flood Insurance Program, which means homes in flood prone areas are again insurable — and purchasable.

The expiration of the flood insurance program from May 31 to June 30 created a freeze on the financing of homes in the flood-prone regions of the Teche Area because potential buyers were unable to purchase flood insurance, said Armond Schwing of Schwing Insurance Co. in New Iberia.

“A lot of the outlying areas in Iberia Parish and St. Martin Parish were locked up, and people couldn’t close on homes because their lenders required they purchase flood insurance,” Schwing said.

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The program was created by Congress in 1968 to provide insurance with a cost premium to residences and businesses in areas susceptible to flooding. As of April, there were 5.6 million policyholders living in designated flood hazard areas nationwide.

Congress intended for the flood insurance program to be self-supporting, so as to avoid taxpayer burden, but the havoc wreaked by the 2005 hurricane season left the program owing a debt of more than $18 billion to the U.S. Treasury.

While lapsing three times this year, most recently from May 31 to June 30, Congress granted the program a temporary extension until Sept. 30 and Thursday passed H.R. 5114, the Flood Insurance Reform Priorities Act of 2010, which is the first amendment made to the 1968 legislation since 2004.

The bill, which was authored by U.S. Rep. Maxine Waters, D-Calif., who chairs the Subcommittee on Housing and Community Opportunity, will increase the maximum amount of insurance coverage under the program from:

• $250,000 to $335,000 for residential homes.

• $100,000 to $135,000 for the contents inside a residence or business dwelling.

• $500,000 to $670,000 for non-residential properties.

U.S. Rep. Charlie Melancon, D-Napoleonville, wrote an amendment to the bill that counters the increased premiums created by FEMA’s decertification of levee systems, which began in 2003 when FEMA kicked-off an initiative to modernize its flood maps by inspecting levees represented on its Flood Insurance Rate Maps. Many levees that once were considered to have a low to moderate risk were re-designated as “Special Flood Hazard Areas” because they lacked the structural integrity to provide 100 years of flood protection. As a result, residents of these areas were required to purchase insurance at higher rates.

Melancon’s amendment requires FEMA to consider all forms of flood protection when assessing a region’s flood risk, which must then be reflected in the rates charged by insurance companies.

“Many small communities in Louisiana have worked hard to build and maintain their own levee systems and are now being treated as if they do not have any flood protection at all,” Melancon said. “By requiring FEMA to account for all flood protection systems when determining flood risk and setting rates, my amendment will lower insurance costs for many Louisiana homeowners and small businesses.”

Waters backed Melancon’s claim and said the amendment will help reduce the cost of flood insurance in flood-prone areas nationwide.

The legislation awaits passage in the U.S. Senate and is likely to pass, possibly as an attachment to another bill, Robin Winchell, Melancon’s spokeswoman, said.

“As Congressman Melancon has said several times, flood insurance is too important to Louisiana families and businesses to be held up by partisan politics,” Winchell said.

Although the program was granted an extension to the end of September, Schwing said the last three lapses of the program caused local housing markets to freeze. With hurricane season extending into November, it is imperative the Senate swiftly approves the legislation passed by the House, he said.

“Not reauthorizing the NFIP ... created a little havoc for home purchases,” Schwing said. “It’s typical politics in Washington. They understood the importance on both sides of the aisle, but one side wanted to attach on other bills, but finally, they passed it as a stand alone bill.”

Schwing said the bill stalled in the Senate, where legislators are attempting to attach other “less-desirable” amendments to the bill.

“It’s typical Washington politics,” Schwing said. “Unfortunately, it’s the consumers who get caught in the crossfire. I’m not a big proponent of government picking up the tab on this thing. I’d like for the premiums to be enough to payout all the claims made through this program. When you do have big flood damage, it can be very expensive. Maybe they can develop a rate that would allow for the program to be self-sustaining because apparently the current rate is not sufficient to pay all the claims so the federal reserve keeps having to back it.”

U.S. Sen. David Vitter, R-Metairie, described the legislation as a “mixed bag.”

“It contains some provisions I support, such as increased coverage limits and a longer time window for phasing in new rates, but there are some major concerns we need to address when the Senate takes up the bill,” Vitter said. “Some of the reforms proposed will lead to higher costs for Louisiana homeowners, which we need to fix. We need to make sure that any spending is offset so that any final version is deficit-neutral.”

If successful, the legislation would:

• Extend the flood insurance program through the end of the 2015 fiscal year.

• Postpone the mandatory requirement for purchasing flood insurance in neighborhoods recently deemed flood zones by FEMA for five years.

• Increase the penalties faced by lenders caught misrepresenting borrowers in order to sell more flood insurance coverage than what the program requires.

• Permit families to pay their flood insurance premiums in installments.