The National Association of Federal Credit Unions recently issued its public support for legislation designed to delay flood insurance premium costs triggered by the Biggert-Waters Flood Insurance Reform Act of 2012.
In a letter to Senate Majority Leader Harry Reid, D-Nev., NAFCU vice president of legislative affairs Brad Thaler outlined his support for Senate bill 1846, commonly known as the Homeowner's Flood Insurance Affordability Act. The legislation has received bipartisan support from Congress as it aims to curb rate increases - sometimes amounting to tens of thousands of dollars - for many American homeowners whose properties are situated on floodplains or areas suddenly deemed higher risk by the Federal Emergency Management Agency.
Providing relief
Most problematic about the Biggert-Waters Act are its unintended consequences, most of which come in the form of skyrocketing homeowners' costs for those who are no longer provided subsidies as a result of reform efforts to the National Flood Insurance Program. Faced with premiums often triple what they paid previously, many residents of Florida, Louisiana, Mississippi and even New Jersey and New York, have been faced with the dilemma of living in a home they can't afford or trying to sell in markets where sales have dried up because of the redefined levels of risk. Additionally, FEMA's re-drawn flood maps placed many homeowners living in previously low-risk areas on floodplains, requiring them to purchase flood insurance from the NFIP. Without subsidies, the requirement costs are often unaffordable.
Legislation laid out by Rep. Mary Landrieu, D-La., Sen. Johnny Isakson, R-Ga., and Sen. Bob Menendez, D-N.J., among others, aimed to delay the most imposing increases by four years while also allowing "grandfathered properties" to avoid the rate hikes as long as they were not bought or sold after the implementation of Bigger-Waters in July 2012.
For credit unions, protecting homeowners is always a vested interest, and the repercussions of the NFIP reform would certainly be felt within the housing market. In many parts of Florida and Louisiana, especially, they already have been, with sales rates plummeting to close 2013 and showing little signs of improvement entering the new year. Accordingly, Thaler wrote to Reid urging Congress to approve any proposals that would exempt more American homeowners from having to pay exorbitant insurance fees - at least for the time being.
"On behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association that exclusively represents the interests of our nation's federal credit unions, I write to urge the Senate to support S. 1846, the Homeowner's Flood Insurance Affordability Act, introduced by Senators Robert Menendez and Johnny Isakson," Thaler said. "This bipartisan legislation would freeze federal flood insurance premium increases on most properties impacted by the new Flood Insurance Rate Maps (FIRM) until FEMA completes an affordability study, provides solutions to mitigate their effect, and scientifically certifies their accuracy. The bill would also ensure that Congress has time to review and act on FEMA's findings."
Housing protection
The immediate concern, for homeowners, real estate professionals and lenders, is that properties strapped with such absorbitant flood insurance policy requirements would plummet in value and, in turn, drag down the values of others in surrounding areas. The affordability study, while potentially informative and helpful to understanding FEMA's risk assessment protocol, would essentially serve as a stall tactic, allowing more time for further legislation to be devised and for an affordable flood insurance market to take shape. For state housing markets that remain in various stages of recovery, time is of the essence.
"Failure to pass this legislation could mean that premiums will continue to skyrocket for many Americans struggling in these uncertain times," wrote Thaler. " Furthermore, various local housing markets could face drastic negative impacts. New premiums could be unaffordable to many, dropping home values in a tenuous economy. We are already hearing reports from our member credit unions that these impacts are beginning to materialize, indicating that action on this matter must be made as soon as possible. As you are likely aware, there are currently 28 bipartisan cosponsors of this bill and many more have expressed their support for such action."
Bipartisan support has been evident for the Senate bill and a separate spending bill approved by the House, which carried certain stipulations temporarily removing premium requirements for affected homeowners. Given the environment that has persisted in Washington over the past six months, that's somewhat amazing. The mid-October government shutdown, after a bipartisan agreement was unable to be reached regarding the debt ceiling, underscored the divide between parties on Capitol Hill.
But if early support for Menendez' and Isakson's legislation is any indication, flood insurance affordability is an issue supported nearly unanimously. The matter affects representatives of many states, especially after FEMA's revised maps took into account flooding events of recent years that devastated areas of the country - like Colorado, New Jersey and New York - previously considered to be moderate risk.