UPDATE - Reform of the National Flood Insurance Program

Posted: Oct 18, 2013 9:58 AM

TO: State and Local Association Executive Officers
FROM: NAR Government Affairs
RE: Flood Insurance Update
DATE: 16 October 2013

NAR Activity Update - Reform of the National Flood Insurance Program

As a follow-up to our previous update regarding the National Flood Insurance Program, NAR continues to press for a delay of flood insurance rate increases. NAR continues to take a number of internal and external steps to address the serious concerns raised by the scheduled implementation of the NFIP reform legislation. Below please find highlights of some recent actions NAR has taken, as well as an update on some activities that were delayed due to the government shutdown. Additionally, we have prepared a letter for your association president to send to your Member of Congress and United States Senators. You can copy and paste the letter directly from this email or use this link to get a copy of the document

Please visit NAR's flood insurance web page to get the latest information including a comprehensive toolkit of resources.

Recent Actions by NAR

• Convened a Presidential Advisory Group to investigate the rate increases, find solutions and reevaluate NAR policy based on the findings. The PAG spent several days meeting with key experts and deliberating and has produced a report consisting of 40 recommendations to provide for both immediate- and longer-term rate relief. This report will be presented to President Gary Thomas later this week.
Wrote FEMA calling for further delay of the increases and in in the interim, convene a National Flood Insurance Summit with Realtors, builders, lenders, insurers, floodplain managers and other key stakeholders to consider a long list of regulatory options, the PAG outlined, that could help reduce the impact on homeowners and communities across the country.
• Worked to secure the support of the United States Senate on a "Dear Colleague" letter urging immediate and longer term legislative action providing for flood insurance rate relief. This letter to Senate leadership was signed by 18 Senators.
• Asked to testify at a hearing before the US House Committee on Financial Services on October 9th. However, due to the government shutdown it was cancelled and an alternative date has not been announced.
• NAR, in cooperation with the American Bankers Association and the National Association of Home Builders, planned a flood insurance forum for Members of Congress and congressional staff to educate Congress on the coming changes required under the Biggert-Waters legislation. The Forum was originally planned for early October but was cancelled due to the government shutdown; an alternative date has not been announced.

Letter template for State and Local Association Presidents
Dear [Member(s) of Congress]:

We are writing to express concerns over drastic increases in flood insurance premiums as a result of recent changes to the National Flood Insurance Program (NFIP). Provisions included in the Biggert-Waters Act of 2012 will make flood insurance unaffordable for working Americans who have built to code and followed the law every step of the way. We urge your support for a delay for the purchases or grandfathering of homes under Sections 205 and 207, respectively, until FEMA submits its congressionally mandated affordability report under Section 237. The Agency should not be allowed to pick and choose which parts of a law it will implement. The affordability study is equally important and imperative to understand the full scope of impact, and we urge its immediate completion.

The Biggert-Waters Act of 2012 phases-in full-risk (actuarial) rates on non-primary residences and businesses built before the first flood maps were established (pre-FIRM). It also requires that the buyers immediately assume the full actuarial rate when purchasing a pre-FIRM primary home. The Biggert-Waters Act will also phase out grandfathering. This means that properties that were built in accordance with all FEMA required building codes and elevations at that time may now be deemed out of compliance, through no fault of the owner, due to flood re-mapping. FEMA has begun the phase-out for the pre-FIRM properties, including homes purchased after enactment, and already we are seeing rate quotes for unaffordable increases and a chill in many local real estate markets across the Nation. In some instances, homeowners that have never flooded and built to code are facing 2,000-3,000% increases in annual premiums. This drastic increase in premiums will cause property values and assessments to drop, bank mortgages to go into default, local tax bases to erode, and economies to be eviscerated. Ironically, while these increases were intended to make the NFIP solvent, it could have the opposite effect if business and homeowners are no longer able to afford the premiums and forced out of the program completely.

We support a fully authorized, sustainable, fiscally responsible NFIP. However, fiscal sustainability must be balanced with protecting the businesses and homeowners who built according to code and have followed all applicable laws. We understand and support the intent of the Biggert-Waters Act, but the unintended consequences of the changes threaten to harm the very people the program was designed to protect.

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