MBA Letter Urges Support of Flood Insurance Modernization Bills

Mike Sorohan msorohan@mba.org

March 10, 2017

The Mortgage Bankers Association, in a letter to leaders in the Senate and House, urged support for two bills that would make key adjustments to the National Flood Insurance Program.

MBA expressed support for S. 563 (https://www.congress.gov/bill/115th-congress/senate-bill/563?r=52), introduced by Sen. Dean Heller, R-Nev.; and H.R. 1422, introduced by Rep. Dennis Ross, R-Fla. (https://www.congress.gov/bill/115th-congress/house-bill/1422/all-actions?r=20&overview=closed), are both named the Flood Insurance Market Parity and Modernization Act. The bills address two primary impediments to development of a private flood insurance market: lack of clarity as to what constitutes acceptable private flood insurance; and uncertainty about the effect of private insurance on the continuous coverage requirement.

MBA Senior Vice President of Legislative and Political Affairs Bill Killmer noted while the intent of the Biggert-Waters Flood Insurance Reform Act of 2012, also known as BW-12, was for private flood insurance to satisfy the mandatory purchase requirement, lack of clarity in the statutory language had the unintended effect of making it more difficult for lenders to accept private flood insurance policies.

"Prior to the enactment of BW-12, lenders were permitted to accept private flood insurance to meet the mandatory purchase requirement of the National Flood Insurance Reform Act of 1994," Killmer said. "The BW-12 requirements have made it difficult for lenders to determine whether a private policy provides the necessary coverage under the definition. By allowing individual states to determine what constitutes acceptable private coverage, H.R. 1422 and S. 563 would add clarity to the current uncertainty amongst lenders in this regard."

The letter also notes these bills clarify that continuous coverage by private flood insurance satisfies any statutory, regulatory or administrative continuous coverage requirements. Under current NFIP rules, a policyholder would likely lose any subsidy or "grandfathered" status if they left the NFIP and opted to obtain coverage with a private flood insurance policy.

"This has created a disincentive for consumers to choose a private policy in lieu of the NFIP and thwarts congressional intent to encourage the development of a more robust private flood insurance market," the letter said. "MBA urges all members of the House and Senate to support H.R. 1422 and S. 563. Passage of the Flood Insurance Market Parity and Modernization Act will encourage the growth of a competitive and sustainable private flood insurance market. Increased private sector involvement will expand available insurance options, lower costs to consumers and reduce the federal government's exposure to flood loss over time."

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