[StBernard] House Committee Passes Louisiana Baker Sponsored Legislation

[Westley Annis]

 WASHINGTON -  The House Committee on Financial Services approved by a voice
vote today legislation sponsored by U.S. Rep. Richard H. Baker, R-Baton
Rouge, entitled the "Flood Insurance Reform and Modernization (FIRM) Act of
2006" (H.R. 4973).

"Today´s committee action is of vital importance for helping to make sure
pending claims get paid and money gets into the hands of business and home
owners anxious to rebuild," said Baker.  "Just as important, this
legislation ushers in common-sense reforms to strengthen the flood insurance
program by making it more responsive to the real needs of property owners,
more responsible to taxpayers, and more financially sound going forward."

National Flood Insurance Program claims liabilities arising from Hurricanes
Katrina and Rita are estimated at over $24 billion dollars, far surpassing
the total claims paid in the entire history of the NFIP.  The NFIP´s
borrowing authority was increased last year from $1.5 billion to $3.5
billion, and then again to $18.5 billion.  On February 15 the House amended
S. 2275, which would further increase the borrowing authority to $20.8
billion.  That legislation is currently pending in the Senate.  In the
meantime, FEMA projects that their funds to pay claims will run out at some
point during the next few weeks.  If Congress does not authorize additional
funds before that time, FEMA will direct the insurance companies that
facilitate claims payments to stop paying these claims.  Also, should the
NFIP run out of money needed to pay the estimated 225,000 Hurricanes Katrina
and Rita-related claims, homeowners whose claims are not paid could initiate
legal action against FEMA.

The Flood Insurance Reform and Modernization Act of 2006 builds on reforms
that the Committee began with the Bunning-Bereuter-Blumenauer Flood
Insurance Reform Act of 2004 in an attempt to ensure the continued viability
of the program.


The legislation would: 
  

·       Increase FEMA´s borrowing authority to $25,000,000,000 in order to
pay claims arising from catastrophic hurricanes in 2005 as well as other
ongoing obligations.

·       Commission a study by the Comptroller General to review mandatory
purchase requirements for the natural 100-year floodplain and homeowners
with non-federal loans, and the current state of pre-FIRM properties. 


·       Phase-in of actuarial rates on vacation homes, second homes, and
non-residential properties that have been subsidized by the program since
its inception. 


·       Increase the fines levied for non-enforcement of the mandatory
purchase requirement from $350 to $2,000. 


·       Increase the amount FEMA can raise rates in any given year from 10
percent to 15 percent. 


·       Increase the 1994 coverage limits for residential flood insurance
policies from $250,000 (structure) and $100,000 (contents) to
$335,000/$135,000.  Nonresidential properties would see an increase from
$500,000 to $670,000. These limits, which have not changed since the
National Flood Insurance Reform Act of 1994, are adjusted for inflation.  


·       Add to basic flood policies a nominal amount for living expenses
following a flooding event and allow for the purchase of additional
coverage.  An optional business interruption provision is included to
provide stability to local economies in areas affected by flood damage and
to offset government disaster relief payments should a flood result in
widespread destruction across a region. FEMA is also given the flexibility
to offer coverage for finished basements and replacement cost of contents
coverage at actuarially sound rates. 

·       Direct FEMA to establish the appeals process and mitigation programs
and enforce the minimum training and education requirements mandated in the
Flood Insurance Reform Act of 2004 and to report on their progress.  


·       Direct FEMA to report to Congress on the financial status of the
NFIP twice a year. 


·       Require lenders to provide notice that flood insurance is available
to all homeowners, not just those in a designated floodplain, as well as
notice of the ability to escrow for flood insurance.  


·       Extend the pilot program for mitigation of severe repetitive loss
properties - as established in the Bunning-Bereuter-Blumenauer Reform Act of
2004 - to 2011.  This pilot program was not funded for the first two years
for which it was authorized. 


·       Direct FEMA to conduct a through review of the nation´s flood maps -
including mapping of the 500-year floodplain - and report to Congress on
mapping progress.  Requires FEMA to give priority to updating maps of the
Hurricane Katrina and Hurricane Rita-affected areas.  Provides additional
funds for mapping. 


·       Authorize the hiring of additional FEMA staff to implement the
bill´s provisions. 


The following amendments were agreed to by voice votes: 
  
An amendment offered by Rep. Debbie Wasserman Schultz (FL), would require
FEMA to participate in non-binding state mediation proceedings


An amendment offered by Ranking Member Barney Frank (MA), would expedite the
notification and publication of flood elevation procedures after
flood-related disasters.


An amendment offered Rep. Gary G. Miller (CA), would cap the penalties
against lenders who are required to ensure homeowners have flood insurance.
It also provides for a good faith exemption to ensure lenders are not
unfairly penalized due to administrative errors.


An amendment offered by Rep. Scott Garrett (NJ), would amend the report
language in the bill to also consider the constitutionality of requiring
homeowners who do not have a federally backed mortgage to participate in the
National Flood Insurance Program.



The National Flood Insurance Program (NFIP) was created as part of the
National Flood Insurance Act of 1968 to enable the federal government to
help cover the cost of flood damages.  Prior to that time, insurance
companies generally did not offer coverage for flood disasters because of
the high risks involved. The legislation as amended in 1973 and 1994
authorizes the Federal Insurance Administration (FIA) and Mitigation
Directorate to administer the NFIP as part of the Federal Emergency
Management Agency (FEMA).  Although FEMA has now been absorbed into the
Department of Homeland Security, the NFIP continues to operate as it had
before restructuring.


Since 1986, the NFIP has been financially self-supporting for the average
historical loss year.  Consistent with statute, the NFIP borrowed from the
U.S. Treasury during those years in which the nation experienced unusually
high flood losses.  These loans were repaid to the Treasury, with interest,
from policyholder premiums and related fees.  FEMA is legally obligated to
pay claims arising from flood events where policies are in place.  

(source: press release)