It's cheaper for the government to buy the property outright than it is to give below market rate loan after loan to them.
I like your solution of not giving them a dime and letting it be between the insurance companies and the homeowners and let the market regulate itself, but unfortunately it doesn't work like that.
Just buy them off the floodplain and be done with it.
What below market rates? have you seen where the rates have been for the last several years?
People are getting tired of bailing out others who are too stupid to do it themselves. The money will be reserved for the truley needed, not some moron that bought in a flood plain becasue he was too dumb to notice his feet were wet.
The loans are over, the money has dried up and the people in the flood plain will contine to flood; this will not change. When and if people are held accountable for their dumb financial mistakes, I will thank the Lord almighty. Giving more money to stupid people who don't know they're stupid does not make them smart, it makes you look stupid with them!
As to the market regulating itself, I agree. This time next year those houses will be worth 10-15 percent less as the insurance will be too expensive.
As to the Chicago thing, it's a default on this site.