The House Financial Services Committee today approved two bills as part of a legislative package intended to reauthorize the National Flood Insurance Program. By a nearly party-line vote of 30 to 26, the committee approved H.R. 2874, the 21st Century Flood Reform Act, introduced by Rep. Sean Duffy (R-Wis.) The committee also voted unanimously to advance H.R. 2868, which would impose a $10,000 cap on the annual chargeable risk premium for any single family home.
While the American Bankers Association supports the broader legislative effort to reauthorize the NFIP, the association has expressed “grave concerns” over certain provisions in Duffy’s bill. Specifically, ABA opposed Section 505 in H.R. 2874, which would drop NFIP coverage for any properties with lifetime claims exceeding twice the replacement cost of the property. “As borrowers lose NFIP coverage, and especially if alternative private coverage is not available or affordable, these properties will lose value and the risk of abandonment and/or foreclosure increases dramatically,” ABA said in a memo on Tuesday. “In some flood-prone communities, this could lead to [a]local or regional foreclosure crisis.”
ABA also opposed a provision in H.R. 2874 that would more than double penalties for non-compliance by lenders, which could drive smaller banks out of the mortgage market, and cautioned that another provision on procedures for monthly premium payments must be implemented in a way that aligns with industry practices on escrows and lender-placed insurance.
The committee will meet on Wednesday next week to continue voting. ABA has expressed support for several bills to be considered then, including H.R. 1422, which would encourage development of a robust private flood insurance market as an alternative to NFIP; H.R. 2246, which would enable the NFIP to engage in private-sector risk transfer deals and would allow the development of private or community flood maps as an alternative to NFIP’s outdated maps; and H.R. 2565, which would require the NFIP to study how it uses replacement cost in setting premiums.
The NFIP’s current reauthorization expires on Sept. 30, and both houses of Congress are working on legislative packages. ABA is working with senators and representatives in both parties to balance affordability and sustainability concerns for borrowers and to ensure that the Federal Emergency Management Agency collaborates with regulators to provide banks with the tools and guidance they need to comply. For more information, contact ABA’s Joe Pigg.