Rangel Dockery and her husband bought a waterfront house in Florida four months ago, assuming their $2,000-a-year flood-insurance premium would remain about the same. After reading recently about a change in the federal flood program, they checked on next year’s rates and were stunned: Their bill will grow to $14,000 annually.

Now the elementary school teacher and her husband, Clint, an information technology specialist, are considering selling their two-bedroom St. Pete Beach home, probably at a loss, because she said they can’t afford the bill, and their mortgage requires flood coverage.

“It was very frustrating to finally have what we’ve worked hard for all of our life,” Rangel Dockery says. “I feel like the rules were changed in the middle of the game. And unfortunately, we can’t play by the new rules.”

Monthly premiums for more than 1 million homeowners are set to increase due to a rewrite by the U.S. Congress last year of the federal flood insurance program. As a result, home prices in flood zones around the country are declining as potential buyers balk at the premiums, said Moe Veissi, a Miami real estate agent who led the Chicago-based National Association of Realtors last year.

Federal flood insurance covers $1.3 trillion of property in all 50 states, with Florida, Texas, Louisiana, California and New Jersey making up two-thirds of all policies, according to Federal Emergency Management Agency, which runs the program.

About 85 private insurance companies contract with FEMA to administer the flood program, including Northbrook, Ill.-based Allstate Corp. and Columbus, Ohio-based Nationwide Mutual Insurance Co.

Consumer groups, governors and mortgage bankers are calling on Congress to reverse the law, which was designed to reduce the National Flood Insurance Program’s growing debt. The measure, called the Biggert-Waters Flood Insurance Reform Act of 2012, phases in rate increases for the 20% of policyholders who have been receiving federal subsidies on premiums.

Some of those subsidies began disappearing or shrinking on Oct. 1, 15 months after the law passed with bipartisan support.

States are searching for ways to reduce homeowners’ bills. In Florida, home to 37% of the nation’s 5.6 million flood policies, state lawmakers are trying to attract private companies to write flood policies and are considering starting a state-based flood insurance pool.

Mississippi sued the federal government to stop the rate increases, saying the U.S. failed to study the economic impact. Louisiana is preparing to sue. Massachusetts Attorney General Martha Coakley proposed legislation this month to cap the amount of insurance lenders can require.

Bills pending in the House and Senate to delay rate increases have bipartisan support, mostly from lawmakers in coastal states.

Research groups that advocate market-based policies, such as Heritage Action for America and the R Street Institute, have urged members of Congress to leave the measure in place.

The law is an “appropriate” way to restore financial viability to the program, and it makes sense to ask those with the greatest risk to pay more, said R.J. Lehmann, senior fellow for the Washington-based R Street Institute, in a statement. Lehmann helped write the law sponsored by Representatives Maxine Waters, a California Democrat, and Judy Biggert, an Illinois Republican, who lost the November election.

Waters, who said she never expected the bill she sponsored to cause large rate increases, is now working to delay its implementation.

“When I agreed to coauthor this legislation, our goal was to create a bipartisan solution to repair our National Flood Insurance Program,” Waters said in a Sept. 30 statement. “Neither Democrats nor Republicans envisioned it would reap the kind of harm and heartache that may result from this law going into effect.”

Louisiana property assessments on homes in flood zones have already dropped by as much as 30% because of the new flood rules, said Michael Hecht, president of Greater New Orleans Inc., an economic development organization. Hecht’s group has been using such stories to warn lawmakers to change the law.

“Owners will lose everything, values of unsellable properties will plummet, bank mortgages will go into default, local tax bases will erode, and economies will be eviscerated,” according to material distributed by Greater New Orleans.

Subscribe Now

Authoritative analysis and perspective for every segment of the mortgage industry

30-Day Free Trial

Authoritative analysis and perspective for every segment of the mortgage industry