Senators Still Determined to Reauthorize Flood Insurance Program
Congress has extended the NFIP 28 times instead of making changes to the legislation.
You’ve probably heard this before, but key lawmakers said last week that they still want to enact a long-term reauthorization of the National Flood Insurance Program (NFIP) this year.
“We must reauthorize and strengthen the NFIP and invest in mitigation and floodplain management before disasters happen in communities,” Senate Banking Committee Chairman Sen. Sherrod Brown, D-Ohio, said as he opened a hearing on the program last week. “NFIP is a complex program, with multiple goals and implications for many of the things people care about most – their homes and their communities.”
Congress has been unable to enact a long-term reauthorization of the program since 2017. Efforts to pass such legislation have been hampered by regional and political differences, as well as the general gridlock on Capitol Hill.
The program owes $20.5 billion to the federal government and the Government Accountability Office said there is no realistic plan to repay the debt. There have been discussions about simply cancelling it, but some lawmakers have objected to that plan because it would leave taxpayers holding the bag.
And so, Congress has temporarily extended the program 28 times through various vehicles, such as end-of-year appropriations bills. The current extension expires on March 8.
If Congress fails to extend the program, no new flood insurance policies could be written. That can have a huge impact on the mortgage industry. During a lapse in the program during 2010, estimates suggest that more than 1,400 home sale closings were canceled or delayed each day.
“Congress cannot allow the NFIP to lapse,” Senate Banking Committee ranking Republican Sen. Tim Scott of South Carolina declared during last week’s hearing. He added, “The status quo is not an option. The program is financially insolvent, with over $20 billion—$20 billion in debt.”
Another Banking Committee member, Sen. John Kennedy, R-La., was blunt in his criticism of FEMA’s operation of the program, in particular new risk maps the agency is using in reevaluating premiums paid by homeowners.
“[FEMA] lied. They said a million people of the 5 million people will see their rates go down,” he said. “I haven't talked to a single person who's seen their rates go down. This is just an excuse to raise premiums, and they don't care. The whole purpose of the National Flood Insurance Program is to provide a product that people can afford.
Kennedy is one of the Senate’s cosponsors of bipartisan legislation that would reauthorize the NFIP for five years. That bill, S. 2142, introduced by Banking Committee member Sen. Robert Menendez, D-N.J., would, among other things:
Cap annual premium increases at 9%.
Provide a means-tested voucher for low- and moderate-income homeowners if their flood insurance premiums become too high.
Increase the maximum limit for certain types of coverage to better reflect the cost of rebuilding and implementing mitigation projects.
Create new oversight measures for insurance companies and provide FEMA with greater authority to terminate contractors with a history of abuse.
Change the claims process in an attempt to level the playing field for policy holders.
A companion House bill, H.R. 4349, was introduced by Rep. Frank Pallone, D-N.J.
It remains unclear when, or if, House and Senate committees will mark up the flood insurance legislation.
Financial services trade groups have told Congress that no matter what the House and Senate do, lawmakers must ensure that flood insurance premiums remain affordable.
“Beyond the necessary long-term reauthorization of the NFIP, we encourage the committee to focus on solutions that ensure the cost of flood insurance premiums are rooted in the actual flooding risk of the property, including the improvement, expansion, and modernization of floodplain mapping; the refunding of premiums paid on properties inadvertently included in special flood hazard areas; and the reduction of premiums based on the implementation of flood mitigation steps,” America’s Credit Unions President/CEO Jim Nussle, wrote in a letter to the Banking Committee in preparation of last week’s hearing.
The Independent Community Bankers of America said that Congress must clear up any uncertainty by enacting a long-term reauthorization. The uncertainty surrounding the program “creates uneasiness in the market, especially as expirations loom and lapses in the program become a possibility,” the ICBA said, in a statement. “A long-term reauthorization is needed to bring stability and confidence to the market.”