U.S. Senate passes Flood Insurance Affordability Act

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On Thursday, Jan. 30 the U.S. Senate voted 67-32 to pass a bill to delay the Biggert-Waters Act for four years.

This bill, the Homeowners Flood Insurance Affordability Act, would halt the immediate implementation of flood insurance premium increases mandated by the Biggert-Waters Act.

On Monday, Jan. 27, the White House Office of Management and Budget had signaled opposition to the bill, though it stopped short of issuing a veto threat.

“Delaying implementation of these reforms would further erode the financial position of the National Flood Insurance Program which is already $24 billion in debt,” a release from the office read. “This delay would also reduce FEMA’s ability to pay future claims made by all policyholders.”

The Menendez-Isakson “Homeowners Flood Insurance Affordability Act” was introduced to the Senate on the one-year anniversary of Superstorm Sandy. The act is designed to accomplish the following, according to Sen. Menendez’s website:

Delay the implementation of rate increases on the following three types of properties until FEMA meets two requirements: 1) completes the affordability study mandated by the Biggert-Waters Flood Insurance Reform Act of 2012, proposes a draft affordability framework for Congressional review, and Congress has a chance to give FEMA affordability authority; and 2) the FEMA Administrator certifies that the agency has implemented a flood mapping approach that utilizes sound scientific and engineering methodologies to determine varying levels of flood risk in all areas participating in the National Flood Insurance Program.

The areas in the NFIP are as follows:

All homes and businesses that are currently “grandfathered” (properties that were built to code and later remapped into a higher risk area). Prior to Biggert-Waters, these policyholders were not penalized for relying on inaccurate FEMA flood maps;

All properties that purchased a new policy after July 6, 2012, before they were legally required to purchase insurance;

All properties sold after July 6, 2012. New homeowners and business owners will continue to receive the same treatment as the previous owner unless they trigger another provision in Biggert-Waters such as Severe Repetitive Loss, non-primary residence, substantial damage, etc.

The measure requires FEMA to propose a draft regulatory framework to address any affordability issues identified by the study within 18 months after the completion of the study and establishes a six month period thereafter to provide for Congressional review. The House and Senate would then hold up or down votes through a privileged motion on giving FEMA the authority to propose regulations in accordance with the regulatory framework. If Congress approves this authority, the targeted freeze promulgated by this bill would continue until regulations are finalized. If not, the freezes would be lifted absent other Congressional action.

Affordability measures addressed by the draft regulatory framework may include targeted assistance to individual policyholders and may consider the negative effects of rate increases and map changes on program participation. FEMA has estimated it will take two years to complete the affordability study before a draft regulatory framework can be provided to Congress.

The bill would require FEMA to complete the affordability study required by Biggert-Waters within two years of the date of enactment.

It would also lift the arbitrary $750,000 cap on the affordability study to ensure FEMA has the funding required to complete it, also within two years of the bill’s enactment.

It would allow FEMA to utilize the National Flood Insurance Fund (NFIF) to reimburse policyholders who successfully appeal a map determination. FEMA currently has the authority to reimburse homeowners for successful appeals of map findings, but Congress has never appropriated funding for this purpose.

Making appeal reimbursement an eligible expense of the NFIF would give FEMA the incentive to “get it right the first time” and repay homeowners for contributing to the body of flood risk knowledge. Unsuccessful appeals would not be reimbursed in any way.

FEMA’s AR and A99 flood zone categories provide more affordable flood insurance to qualifying communities that are in the process of levee construction, reconstruction, and improvements. Current regulations require a certain level of federal participation to qualify for either an A99 or an AR designation, and therefore prevent FEMA from giving communities fair credit for improvements made to existing flood control systems. Proactive communities that invest in mitigation should not be penalized for self-financing flood protection projects. 

The bill would establish a Flood Insurance Advocate within FEMA to answer current and prospective policyholder questions about the flood mapping process and flood insurance rates. The advocate would be responsible for educating policyholders about their individual flood risks, their options in choosing a policy, assisting property owners through the map appeals process, and would be tasked with improving outreach and coordination with local officials, community leaders, and Congress.

“As we continue to recover from the worst natural disaster in our state’s history, a manmade disaster is looming, jeopardizing that recovery,” said Sen. Menendez in a press release. “The combination of new flood maps and phase out of premium subsidies for the National Flood Insurance Program threatens to force victims out of their homes and to destroy entire communities.”

The bill now advances to the House of Representatives, where it must be put on the calendar for a vote by House Speaker John Boehner.

The House is considering a similar bill sponsored by U.S. Representative Frank LoBiondo (NJ-02).

As reported last week by the Beachcomber News, Boehner has stated that he would not bring the bill to the floor for a vote as written. He has requested a modified version that would reduce the financial impact on the debt.

“There is a finite window of opportunity to help millions of households from the crushing financial burden on the horizon,” LoBiondo said in a press release Thursday, in which he urged Boehner to follow the Senate’s lead. “There is bipartisan agreement on the scope and depth of this problem. There is also a bipartisan solution readily available and approved by the Senate. It is imperative we take action and inexcusable if additional vote delays occur.”

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