Homeowner Flood Insurance Affordability Act sent to Prez

The house version of this bill was passed earlier in the week, the Senate version passed on Thursday, and the President is expected to sign it into law very soon.  For the last couple of days I have been trying to find information on how the House and Senate versions of this bill will be (were?) reconciled, with little success.  Here is an excerpt from an interesting take published by the town of Dennis, MA on their Planning Department blog, with some editing on my part:

Section 3 deals with repealing increases in rates that have occurred over the past 18 plus months.  It repeals a requirement that any policy bought after July 2012 be for “full actuarial risk” and removes a requirement that properties sold would be immediately subject to full actuarial risk.

This is important, as most coastal communities have thousands of properties being added to the flood zone as part of the pending map changes.  Prior to July 2012 the owner of a home constructed before the Flood Insurance Rate Maps went into effect was allowed to buy flood insurance at a discounted rate if the home met the standards that were in place at the time of construction.  Under Biggert-Waters this provision was removed.  The 2014 bill has restored this provision.  Also, properties located within the flood zones established in 1986 and 1992 had, before Biggert-Waters, been able to transfer their discounted flood insurance to new purchasers.  This transferability of flood insurance policies protected property values and provided an incentive for homeowners to maintain flood insurance even after all mortgages had been paid off.  When this ended in July 2012, home buyers were finding they faced hefty insurance rate increases that made homes they were about to close on unaffordable.

Another part of the rate increase repeal is a bit more curious, as it removes a provision that established paying full risk value for a new policy if a homeowner allowed coverage to lapse and replaces it with a provision that protects the discounted rate for a future purchase of of flood insurance by placing a caveat that the full risk value is not required if the dropping of the coverage was as a result of the insurance no longer being required.  I am not sure where this takes us and have not seen much discussion of this provision.  It appears to allow for a homeowner to drop flood insurance when a mortgage is paid off and pick up the discounted rate again at a future date.  I am not sure if this is the intent, but we will have to wait for guidance.

The rate increase repeal also provides for refunds for over-payments based upon repealing increases that have occurred.  It would appear that this refund issue will affect a very small cross-section of people, mainly those who have purchased flood zone property since July 2012 and had the new full risk premiums assessed rather than previously existing grandfather rates.

And another report, this one from Fox News, HERE.