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Mike Parsons and his wife Sandy Parsons stand on a large mound of dirt in their back yard near their home in Bethel Island, Calif., on Sunday, Dec. 8, 2013. Congress' attempt to reform FEMA's National Flood Insurance Program is having an enormous effect on the Parsons, who recently were shocked to discover that their flood insurance premium next month will skyrocket by 485 percent. The piles of dirt is left over from the tons they trucked in while attempting to raise the level of the ground surrounding their house in hopes of lowering their premium. (Jose Carlos Fajardo/Bay Area News Group)

BETHEL ISLAND -- When Mike and Sandy Parsons received the bad news from their insurance agent this fall, they thought there had been a mistake.

Coverage on the 1,565-square-foot home they bought on Bethel Island just over a year ago, they were told, would be skyrocketing from $2,160 a year to $12,634.

"I started to freak out and make phone calls, and I found out quickly that it was not a typo," Sandy Parsons said.

The Parsons' dilemma, although unusual, is not unique. Thousands of people in the Bay Area and roughly 1 million Americans are experiencing the effects of a law Congress enacted in July 2012 to stabilize the cash-strapped federal agency that provides flood insurance for properties in high-risk areas.

The changes affect 2,102 property owners in Contra Costa County, or 40 percent of everyone with flood insurance, according to FEMA. And they're not all on an island in the Delta.

"They're all over the place -- they're in Walnut Creek, Danville, Richmond," county ¿flood plain manager Rich Lierly said of the low-lying properties, noting that many are near creeks that can overflow.

In the nine-county Bay Area, approximately 16,300 properties of the slightly more than 50,000 that have flood insurance are losing their federal subsidies.

In hopes of lowering their premium, Sandy Parsons has spent fruitless hours searching for a solution before their rate goes up in January, a change that will drive their monthly house payments from $2,450 to $4,180 because the bank wants a full year's worth of premiums in advance.

With three young children at home, the Parsons face the prospect of paying more for flood insurance ¿over 30 years -- approximately $379,000 -- than the $219,000 purchase price of the house. They say the situation is untenable.

"Who will buy (our) house?" she said.

For the past four decades, flood insurance has been mandatory for anyone with property in a flood zone and a federally backed mortgage.

Because FEMA won't allow the Parsons to cancel their policy, she plans instead to allow it to lapse for 2015. Once that happens, her lender would require her to buy so-called "force-placed insurance," which Sandy Parsons thinks might cost significantly less though it might not cover personal items or owner liability.

Owners of homes and commercial properties built in flood plains before the Federal Emergency Management Agency began mapping low-lying areas received a break on their premiums as long as their local jurisdictions adopted building standards to reduce or eliminate flood damage.

But flood disasters caused by the likes of Hurricane Katrina and Superstorm Sandy have left the National Flood Insurance Program $24 billion in debt as it settled claims by policyholders who enjoyed the artificially low rates.

As a result, Congress is phasing out these policies by raising premiums.

In some cases rates have started going up incrementally -- 25 percent per year until they reflect the true risk of coverage.

The price of other policies is increasing to the full-risk rate immediately.

Starting Jan. 1, the 25 percent annual increase in premiums initially affected those with vacation homes. Rates for commercial properties and primary residences that repeatedly have sustained severe flood damage also began going up by 25 percent per year Oct. 1.

In the case of homes that have changed hands since July 6, 2012, the actual cost of coverage is passed on to the new owners.

Those who bought their home before the new rules took effect can keep their subsidized rates until they sell or the policy lapses.

In addition, FEMA is adding many additional parcels to the flood plain maps, so more people will be affected as those updates are made and grandfather clauses expire.

Rep. Jerry McNerney, D-Stockton, whose 9th District includes Bethel Island, is among about 150 members of the House of Representatives who have introduced a bipartisan bill that would delay rate increases for many affected homes while FEMA studies ways to make the premiums more affordable.

McNerney said when he voted for the initial reform in 2012, he was hoping FEMA would implement the changes more gradually and with more thought given to their effects on policy holders.

"To just drop an anvil on their houses is not going to help," he said. "Unfortunately, it wasn't done in a sensitive way that would make it palatable to people."

However, FEMA spokesman Dan Watson notes that Congress -- not his agency -- stipulated what the rate increases would be and didn't require the affordability study to be done before raising premiums.

"We've looked for flexibility in implementing this, but at the end of the day we have to implement the law directed by Congress," Watson said.

Meanwhile, those affected by the changes are looking for ways to handle the escalating premiums.

"I think some of those people are going to lose their homes," said Oakley insurance broker Tom Stephens. "If you're on a budget and you bought a house on Bethel Island (within the past 17 months), you're going to be financially hit hard."

Lierly, who oversees development in flood plains for Contra Costa County's public works department, said buyers may not be as interested in these properties as a result.

"If you want to sell your house, (the higher premiums) might very well affect the value," he said.

Stephens cites the case of a prospective client who was considering buying a property with both a house and a mother-in-law unit; the man walked away from the sale after learning that coverage on the smaller structure alone would cost $6,355 annually.

Contact Rowena Coetsee at 925-779-7141. Follow her at Twitter.com/RowenaCoetsee.