Flood insurance: Bipartisan Congress votes to roll back impact of 2012 legislation

Both the Senate and House have passed bills on bipartisan votes (Senate 67-32, House 306-91) to reverse the impact of the 2012 Biggert-Waters Act. The Senate now has the option of either accepting the House Bill or seeking to negotiate the differences between the two Bills. Press reports on Friday indicated that Senate Majority Leader Harry Reid will schedule a vote next week on the House-passed legislation.

While I have heard no reports locally of sales affected by the threat of higher flood insurance premiums,the National Association of Realtors has estimated that some 40,000 sales nationally have been cancelled or delayed because of the confusion over the proposed changes under the 2012 Act. It is not possible to know, however, to what extent such confusion has contributed to buyers deciding not to make an offer on properties in flood zones.Certainly, questions have been asked.

Whereas the Senate Bill basically delays the impact of Biggert -Waters by up to 4 years, the House Bill deals directly with the most important issues.

The main features of the House Bill are:
– the sale of a property will no longer trigger the end of existing premium subsidies
– the restoration of grandfathering, which prevents a property’s rate from being increased if it is mapped into a higher risk zone
– mandating that the rate on any individual property cannot increase by more than 18% per annum.

The House Bill also levies  a small fee ($25 for primary residences; $250 for secondary residences and businesses) on policyholders. According to the Congressional Budget Office the fee will make the House Bill revenue neutral, whereas the delays in the Senate Bill would result in the loss of $2 billion in revenues.

Another key feature for us in Massachusetts is that the House Bill requires FEMA to certify that 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.As I have previously reported, it has been alleged that FEMA has applied Pacific Coast mapping technology to Massachusetts.

The proposed legislation provides a stabilization while a longer-term solution to the finances of the national Flood Insurance Program is sought. The huge and widespread debate in recent months should ensure that the final solution comes after an informed and public process.

Here’s a good summary of the House vs Senate Bills from the Tampa Bay Times.

If you  – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 781.631.1223 or andrew@HarborsideRealty.com.

Andrew Oliver is a Realtor with Harborside Realty in Marblehead

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