THREE FORKS, Mont. (AP) — More than 1,800 Montana residents and businesses now receiving discounted flood insurance will start to see their premiums rise as Congress looks to get the federal program out of a $24 billion hole.
Legislation signed by President Barack Obama on Friday means those homeowners won't see premiums jump all at once as scheduled under a 2012 overhaul. The new law increases rates for owner-occupied homes by up to 18 percent annually, while businesses and second homes will see hikes of 25 percent a year.
The changes will affect residents and businesses with subsidized policies in flood zones across Montana who were there before their communities joined the National Flood Insurance Program. No one is sure how high rates will go, but there is worry that in towns such as Three Forks, the increases could damage the real estate market and hinder development.
Nearly all of Three Forks is in a flood zone because it's located where the Gallatin, Madison and Jefferson rivers join to form the Missouri River. That means any homeowner with a mortgage in that area must carry flood insurance.
There are 181 policyholders in Three Forks, about half of whom receive discounts through the federal program, according to data from the Federal Emergency Management Agency.
But residents here are hard-pressed to remember the last time any water from the surrounding rivers spilled onto town streets.
"I'd probably have to call one of local historians to find out," Mayor Steven Hamilton said.
Even so, the town has paid millions into the federal flood program since 1980, while never receiving any money back in flood claims. What residents pay in premiums has all gone toward repairing flood damage in other parts of the nation.
Three Valleys Insurance owner Doug Hamilton says the looming premium increases are too much for the town of about 1,900 people, whom he describes as "hard-working, honest people with limited means."
In a worst-case scenario, people seeing their premiums rise to unaffordable levels would walk away from their mortgages. Homebuyers would be hesitant to purchase in Three Forks if they face insurance premiums as high as half of their mortgage payments.
Real estate values would be "devastated" and a recent resurgence in development would be halted, he said.
He and his office manager, Jeri Widmer, think they have come up with a way around the problem. Virtually all flood insurance is provided through the federal program, but they located a hard-to-find private insurer and started offering an alternative in November.
Since then, dozens of people have switched plans, among the first in Montana to do so.
The results have been dramatic, Widmer said. In one case, a $2,900 premium dropped to $504 on a $115,000 home, Widmer said. In another, a $3,600 premium quote through the federal program became $616 through the private carrier.
Brian Dennin, a cook for a Bozeman retirement home, bought his 124-year-old house with his wife and 5-year-old daughter last year for $93,000 in a foreclosure sale. He only learned midway through the process that he would have to buy flood insurance. He was quoted a $2,500 annual premium.
"I wouldn't have been able to buy the house," said Dennin, 42. "We found a house we love and put our hearts and souls into buying it. And it sort of was almost like a stick in the mud."
Now, he's working with Widmer on a private plan that he estimates will cost $536 a year.
Widmer thought of the idea during a FEMA-run flood insurance class. She did some research and found a private carrier willing to provide insurance in Three Forks.
Hamilton says he credits Widmer with saving the town — though they don't know it yet. About 12 to 15 policyholders have switched so far, and about as many are in the process.