House Passes Bill Overhauling Flood Insurance Program

Mike Sorohan msorohan@mba.org

November 16, 2017

The House on Tuesday approved legislation overhauling the National Flood Insurance Program, a key plank in the Mortgage Bankers Association's legislative agenda this year.

By a 237-189 vote, largely on party lines, the House approved H.R. 2874, the 21st Century Flood Reform Act (https://www.congress.gov/bill/115th-congress/house-bill/2874). The bill renews the National Flood Insurance Program for five years; provides for an overhaul of flood mapping requirements; exempts commercial and multifamily properties from mandatory purchase requirements and lays groundwork for a more robust private flood insurance market-all key MBA priorities.

In a statement, MBA President and CEO David Stevens, CMB, commended the House for passing H.R. 2874. "This long-term reauthorization will provide certainty to homeowners and businesses that depend on the program for flood damage protection," he said. "Additionally, this legislation contains important provisions related to the clarification and expansion of the private flood insurance market. Finally, we are glad to see the exemption for large commercial and certain multifamily properties from the mandatory purchase requirements of the NFIP, effective January 2019."

MBA had long called for overhauling the NFIP, which is now more than $30 billion in debt following catastrophic storms this summer affecting Texas, Florida and Puerto Rico. The program has been criticized for using outdated mapping and technology that resulted in repeat claims and inaccurate coverages in other areas.

Earlier this year, MBA identified three priorities to be included in final legislation:

--Long-term reauthorization of the NFIP, to provide certainty to homeowners and small businesses that depend on the program for flood damage protection, to protect residential and commercial real estate markets and to provide stability for the companies and agents that sell and administer NFIP policies to millions of consumers across the country.

--Exemption for commercial and multifamily properties. Imposing the NFIP structure which was designed for "one borrower, one home, one policy" on commercial and multifamily transactions is difficult for borrowers and lenders. The current limit of $500,000 for commercial and multifamily properties is insufficient based on the value of many of the properties in question.

--Development of the private flood insurance market: To ensure a stable, affordable and sustainable flood insurance market, a private market for flood insurance must be allowed and encouraged to develop. Increasing private sector involvement also could benefit consumers by expanding available insurance coverage options, lowering costs and increasing the number of at-risk properties that are insured.

"MBA now urges the Senate to finalize its ongoing flood insurance negotiations and act before the December 8 expiration of the temporary NFIP extension," Stevens said.

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