LoBiondo Lauds House Passage of Flood Insurance Legislation; Menendez Signs off on Bill

WASHINGTON – After months working behind the scenes to craft a bipartisan compromise, U.S. Rep. Frank A. LoBiondo (R-2nd) March 4 praised the 306-91 vote in the House on legislation that would lower premium increases mandated under the 2012 Biggert-Waters Flood Insurance Reform law for most homeowners, permanently remove the home sale rate increase trigger to provide certainty to the real estate market, and ensure greater fiscal solvency of the National Flood Insurance Program (NFIP).
“The House acted tonight to remove a major financial hurdle to the tens of thousands of homeowners still rebuilding 18 months after Sandy came ashore. By no means is this legislation all that I have advocated for, however it does represent a fair and workable compromise to assist many South Jersey residents while ensuring the long-term solvency of the NFIP,” said LoBiondo. “To not act today would mean the financial devastation of countless families and communities tomorrow. I applaud my colleagues for choosing the fiscally-sound, long-term solution.”
Previous rate increases of 25 percent mandated under Biggert-Waters will be replaced with premium increases between 5 percent and 18 percent under tonight’s House-approved legislation on primary residence policies until full-risk coverage is reached.
Additionally, an assessment of $25 per year on primary residence polices in the NFIP and $250 per year on business and non-primary residence policies in the NFIP will be created. All revenue from the assessments would be placed in the NFIP reserve fund (created under Biggert-Waters), which could be used to transfer extreme catastrophic events to the private market. The assessment benefits all policyholders by building up the NFIP reserve fund. Currently, the reserve fund balance is inadequate to handle future storms like Hurricanes Katrina and Sandy. The assessment would phase-out as premium rates match projected loss.
Furthermore, the Congressional Budget Office reports that the legislation will decrease direct spending by $165 million over five years and have no budgetary affect over 10 years. Other key provisions of H.R. 3370, the “Homeowner Flood Insurance Affordability Act of 2014” as amended, are as follows:
 Permanently removes the home sale/new policy rate increase trigger for primary residences, ensuring the person buying the home is treated the same as the person selling it. Removal of these provisions would restore certainty to the real estate markets in communities across the country;
 Reinstates grandfathered rates by decoupling rate increases with FEMA remapping. Removal of this provision ensures that policyholders are not penalized who built to code and built to standards of existing Flood Insurance Rate Maps;
 Provides a refund for the people who purchased a Pre-FIRM subsidized home without the full transparency from FEMA on the new BW-12 rate structure, which wasn’t made public for a year after BW-12 was signed into law;
 Provides home improvement protection by returning the “substantial improvement threshold” (i.e. renovations and remodeling) to the historic 50% of a structure’s fair market value level and ensures that necessary renovations can continue without penalizing homeowners with excessive flood insurance rate hikes and costly mitigation; and,
 Includes generally accepted affordability measures such as: high deductible options, flood-proofed basement exemptions, map certification, flood protection funding recognition, optional monthly installment plans, exceptions on escrow requirements, removing the funding cap on the affordability study, etc.
For several months LoBiondo has been part of a task force supported by the House Republican Leadership charged with finding a common-sense solution. There have been several lengthy meetings to hammer out this compromise that was supported by a broad bipartisan group. The new bill passed tonight melded provisions from the previously-introduced legislation by Reps. Michael Grimm (NY-11), Maxine Waters (CA-43) and LoBiondo with proposals from Rep. Bill Cassidy (LA-06).
“From the start, this was a bipartisan effort on behalf of the millions of homeowners facing the real threat of excessive increases. I deeply appreciate the partnership of Bill Pascrell, Michael Grimm, Bill Cassidy, Maxine Waters and those who remained focus on finding a flood insurance fix. Additionally, I deeply grateful to Majority Leader Cantor for his commitment and determination in bringing this national issue to a vote,” concluded LoBiondo. “I call upon the Senate to immediately follow the House’s lead and approve this legislation so that millions of homeowners can finally move forward with their lives.”
***
The following was released by Sen. Robert Menendez:
Menendez Signs Off on House Flood Insurance Bill; Looks Forward to Swift Passage
WASHINGTON — U.S. Sen.Robert Menendez, author of Senate-passed legislation to relieve homeowners from unaffordable spikes in flood insurance premiums, signed off on House companion legislation that closely mirrors his bill. Menendez has been working closely with House and Senate leaders to ensure the House bill would provide adequate relief to homeowners.
“As a result of improvements made during bipartisan negotiations, I’m very pleased that the bill being put forth in the House will end the most egregious problems with the flood insurance program and bring some real relief to thousands of homeowners who desperately need our help,” said Senator Menendez. “I’m encouraged by this progress and hope we can bring the bill over the finish line very, very soon.”
The new and improved House legislation closely parallels Menendez’s Homeowner Flood Insurance Affordability Act and prevents skyrocketing rate increases by implementing the following measures:
Prevents Skyrocketing Rate Increases
Creates a Firewall on Annual Rate Increases – Prevents FEMA from raising the average rates for a class of properties above 15% and from raising rates on individual policies above 18% per year for virtually all properties.
Repeals the Property Sales Trigger – Repeals the provision in Biggert-Waters that required homebuyers to pay the full-risk rate for pre-FIRM properties at the time of purchase. This provision caused property values to steeply decline and made many homes unsellable, hurting the real estate market. Under the Menendez/Grimm Bill, homebuyers will receive the same treatment as the home seller.
Repeals the New Policy Sales Trigger – Repeals the provision in Biggert-Waters that required pre-FIRM property owners to pay the full-risk rate if they voluntarily purchase a new policy. This provision disincentivizes property owners from making responsible decisions and could hurt program participation. The Menendez/Grimm Bill allows pre-FIRM property owners to voluntarily purchase a policy under pre-FIRM conditions.
Reinstates Grandfathering – Repeals the provision in Biggert-Waters that would have terminated grandfathering. If grandfathering was terminated, property owners mapped into higher risk would have to either elevate their structure or have higher rates phased in over 5 years. The Menendez/Grimm Bill allows grandfathering to continue and sets hard caps on how high premiums can increase annually.
Refunds Homeowners who Overpaid – Requires FEMA to refund policyholders for overpaid premiums.
Affordability goal – Requires FEMA to minimize the number of policies with annual premiums that exceed one percent of the total coverage provided by the policy.
Additional features of the Menendez/Grimm Homeowner Flood Insurance Affordability Act of 2014
FEMA Transparency and Outreach Requirements
Reimburse Successful Appeals – Allows FEMA to utilize the National Flood Insurance Fund to reimburse policyholders and communities who successfully appeal a map determination. FEMA currently has the authority to reimburse 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 and communities for contributing to the body of flood risk knowledge.
Flood Insurance Advocate – Establishes a Flood Insurance Advocate within FEMA to answer current and prospective policyholder questions about the flood mapping process and flood insurance rates. The Flood Insurance Advocate will 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 improve outreach and coordination with local officials, community leaders, and Congress.
Urban Mitigation Fairness – Requires FEMA to establish guidelines on alternative mitigation methods for urban structures where tradition mitigation efforts such as elevation are impractical, i.e. rowhouses in Hoboken. This section makes clear that such alternative forms of mitigation shall be taken into account in the calculation of risk premium rates.
Clear Communication – Requires FEMA to clearly communicate full flood risk determinations to policyholders even if their premium rates are less than full risk. This helps to inform policyholders as to their true flood risk.
Fairness for Small Businesses, Houses of Worship, Non-Profits and Low-Income Homes – Requires FEMA to report to Congress on the impacts of rate increases on small businesses, non-profit entities, houses of worship, and residences with a value equal to less than 25% of the area median home value. If FEMA determines there is an effect on affordability for these properties, it must provide recommendations to Congress within 3 months after making the determination.
Mapping Accuracy – Requires FEMA to certify its mapping process is technologically advanced and to notify and justify to communities that the mapping model it plans to use to create the community’s new flood map are appropriate. Also requires FEMA to send communities being remapped the data being used in the mapping process.
Notification – Requires FEMA, at least 6 months prior to implementation of rate increases as a result of this Act to make publicly available the rate tables and underwriting guidelines that provide the basis for the change, providing consumers with greater transparency.
Other
Budget Neutral – The Menendez/Grimm bill does not add a dime to the deficit nor does it hurt the solvency of the NFIP.
***
For a separate story on the bill as reported in “The Hill” visit:
http://thehill.com/blogs/floor-action/199900-house-votes-to-retreat-from-2012-flood-reforms