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Senate Passes Flood Insurance Bill
DAILY REAL ESTATE NEWS | TUESDAY, MARCH 13, 2014
The Homeowner Flood Insurance Affordability Act repeals the Federal Emergency Management Agency's authority to increase premium rates at time of sale or new flood map, and refunds the excessive premium to those who bought a property before FEMA warned them of the rate increase. It also limits premium increases to 18 percent annually on newer properties and 25 percent for some older ones.
Additionally, the bill adds a small assessment on policies until everyone is paying full cost for flood insurance.
"As the leading advocate for home and property owners, NAR applauds this bill for the relief and protection it will bring to businesses and families nationwide, who are experiencing financial hardship because of the extreme and sudden premium increases," said Brown. "We believe this legislation will bring relief to property owners by ensuring a slow and steady phase in of risk-based increases."
Source: "Cost of Flood Insurance Rises, Along With Worries," The New York Times (Oct. 12, 2013)
NAR: More on the National Flood Insurance Program
Why Flood Insurance Subsidies are Phasing Out
1,300 Sales a Day to Stall if Flood Insurance Stops
Flood Insurance PAG Holds First Meet
By Russell W. Riggs
Earlier this past summer, NAR President Gary Thomas appointed a Presidential Advisory Group (PAG) to investigate the impacts that federal legislation passed last year to reform the National Flood Insurance Program (NFIP) will have on the real estate industry and property owners. The PAG held its first face-to-face meeting in Washington, DC on Oct. 1-3. The focus of this meeting was to educate PAG members on how the NFIP operates, the current status of the program, how the changes brought by the new law will reform the program, and to what extent flood insurance premium rates will increase. The PAG also made several recommendations on how the program can operate more effectively, so that it remains solvent and actuarially responsible without unduly burdening property owners. The PAG will submit a report to President Thomas at the Annual Conference in San Francisco.
When Superstorm Sandy slammed into New York and New Jersey last fall, it sent massive floods through the streets of coastal towns and cities across the Northeast, turning areas like Toms River, N.J., into something like a war zone.
But nearly a year later, residents there and in many other coastal communities across the U.S. face a potentially far more devastating menace: a nationwide revamp of flood insurance rates, forcing premiums that were once around $500 per year into the $5,000-, $10,000- and even $20,000-a-year range and higher.
"The adverse effect of [this] would be more devastating than Hurricane Katrina," Louisiana Insurance Commissioner Jim Donelon said in an interview with weather.com, noting the crippling economic damage the historic 2005 storm left behind on the Gulf coast. "Because it will render literally thousands of properties in my state worthless."
What's prompting reactions like this is the Flood Insurance Reform Act of 2012, passed by Congress last summer and often called "Biggert-Waters" for its two Congressional sponsors: former Illinois Rep. Judy Biggert and Rep. Maxine Waters of California.
The act made sweeping changes to the National Flood Insurance Program (NFIP) – which has been the only provider of flood insurance for homes and businesses across the U.S. since its creation in 1968 – with the goal of raising rates to reflect the true actuarial risk of properties in flood zones.
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Legislative Update from NAR
By Austin Perez & Russell Riggs
With NAR's support, Senator Mary Landrieu (D-LA) successfully added a 1-year delay of "grandfathered" flood insurance rates to the Senate Homeland Security Appropriations Bill as approved by committee on July 18. The House-passed version also includes this provision. Next, the full Senate must vote on the measure.
A grandfathered rate is a discount given to a homeowner when the community's flood risk is increased with a map update, because the home was built and maintained in compliance with the previous standards. These homes are often allowed to keep the lower rate from the older flood map.
These grandfathered as well as other subsidized flood insurance rates are being phased out under the Biggert-Waters Act that extended the National Flood Insurance Program for five years. The amendment would delay the phase-out for properties "grandfathered" under older rates in areas remapped into higher-priced flood zones before Sept. 30, 2014.
The law's other phase-out provisions – for older second homes and business properties and for homes purchased after July 2012 – will continue to go into effect on Oct. 1, 2013. NAR is working on a longer delay and expanding it to include the other subsidy phase-outs, in addition to grandfathered properties.
NAR Legal Guidance on Flood Insurance Disclosures
The 2012 Biggert-Waters Flood Insurance Reform Act reauthorized the federal program for five years. Because the Act also phases out rate subsidies for older property owners and buyers, and some could spend considerably more on flood insurance as a result, brokers and agents have asked about the disclosure of the rate changes. NAR's General Counsel offered this legal guidance in the marketing and sale of property for which flood insurance may be required, or that is located in areas where the purchase of flood insurance may be prudent.
National Flood Insurance Reform FAQ
Questions most commonly asked regarding the recent changes to the Biggert-Waters Flood Insurance Reform Act of 2012
FEMA Fact Sheet
A breakdown of the impact on National Flood Insurance Program (NFIP) changes