Jul 30, 2014

Bill To Avert Large Flood Insurance Rate Hikes Passes U.S. Senate

Provisions of Biggert-Waters law could permanently change if bill is signed by Obama

Bill To Avert Large Flood Insurance Rate Hikes Passes U.S. Senate
A bill to eliminate exponential rate hikes in the National Flood Insurance Program is on its way to the desk of President Barack Obama.

After passing the full House of Representatives, the bill cleared the U.S. Senate on Thursday by a 72-22 margin. The bill differs from a previous effort to delay rate hikes for four years in that the version which passed Thursday changes the law permanently.

The bill, sponsored by Sen. Robert Menendez (D-N.J.) places caps on rate increases for homeowners and is funded a $25 surcharge for primary homeowners and a $250 surcharge for secondary homeowners and non-residential properties.

Rates for homeowners would not be permitted to rise more than 15 percent per year in most cases and not more than 18 percent each year for virtually all other types of properties. The bill also eliminates the so-called "property sales trigger" which would have required higher rates to kick in when a home is sold. The bill also reinstates grandfathering for policies that are already in effect.

Because the 2012 Biggert-Water flood insurance reform law eliminated subsidies for flood insurance under the national program, rates could have climbed into the five-figure range for properties in flood zones that were not raised to meet newly promulgated height standards. Because flood insurance is required by mortgage companies for homes in flood zones, coastal homeowners who could not afford to raise their homes feared they could lose them.

“Thanks to a strong, bipartisan effort,” said Menendez in a statement, “we have averted the manmade perfect storm that would have crushed thousands of families under the weight of skyrocketing flood insurance rates, forced many from their homes, plummeted property values and destroyed entire communities.”

The bill also requires FEMA to minimize the number of policies with annual premiums that exceed one percent of the total coverage provided by the policy.

“Residents had come to me in tears, saying they were afraid they’d lose their homes,” Menendez said. “Mayors painted a dire picture of desolate blocks lined with abandoned, boarded-up houses and an eroding tax base that would have undoubtedly led to deep service cuts."

"Something had to be done.”

The bill is widely expected to be signed into law by Obama.

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