New FEMA Guidelines Create Uncertainty

March 22, 2014

Filed under: 1. Marin Update — dwdupont @ 10:41 am

For properties in a flood plains as designated by the government & FEMA: This is specifically related to insurability. Most banks that issue mortgages to homes in areas designated as flood zones are required by federal guidelines to have evidence of homeowner flood insurance policies. Due to the relative insolvency of FEMA, the Federal Govt. is in the process of creating legislation that removes many of  the grandfather provisions that capped flood insurance policy premium rate increases. It is imperative that you discuss the future cost of the National Flood Insurance Program with your insurance provider if your property is in an designated as a flood plain.  FEMA has recently made changes that may significantly increase flood insurance rates to unprecedented and unreasonable levels.  Depending on the location of the home and the flood elevation certificate, these rates currently can be in excess of $30,000 annually for $250,000 in coverage. The long-term effects of these new policies are uncertain as the Federal Government scrambles to create sensible legislation.

Obama has just signed the below Homeowners Flood Insurance Affordability Act which mitigates the draconian nature of the current quagmire:

HR3370 Homeowners Flood Insurance Affordability Act is signed by the President

 The President has signed the Homeowner Flood Insurance Affordability Act of 2014, (HFIAA14) sent for his signature on March 13, 2014 after passage with bipartisan support by both the House and the Senate.

With presidential signature, FEMA and the NFIP will begin to set implementation timelines, and identify the  procedures to bring the relief offered by this new law to the policyholders and property owners across the country.

Highlights of the new law are:

HFIAA14 directs FEMA and the NFIP to modify BW12  Flood Reforms already in place as well as to modify the future implementation of BW12 Flood Reforms. A Congressional Summary of HFIAA14 is available to read more.  We appreciate your interest and involvement in the political process, to see how your Senator voted, click here to see how your Representative voted, click here.

Some important highlights include:

  • Removes the sale of a property as a trigger to go directly to actuarial rates and establishes a glide path to reach actuarial rates through annual premium increase caps.
  • Requires FEMA to make refunds to policyholders with new policies after July 6, 2012 that were required to pay actuarial rates due  to the BW12 Flood Reforms
  • Annual premium increases will be limited to a minimum 5% increase and a maximum 18% increase (under BW12 there was no minimum and there was a 20% maximum.)
  • Establishes a surcharge for all pre-FIRM flood policies:  $25.00 per primary residences and $250 per policy for non-primary and non-residential properties.
  • Allows the Grandfathering rules in effect today within the NFIP to remain-by deleting  Section 10027 of the BW12 Flood Reform Act
  • Maintains 25% premium increases for non-primary, business properties and severe repetitive loss properties. ( BW12 Section 1307 items A-E)
  • Re-establishes 50% home improvement level as the threshold for compliance with flood mitigation building practices.  (BW12 had lowered it to 30%)
  • Increases the funds available for the Affordability study to $2.5M
  • Requires FEMA to consult with the WYOs during the entire process of any upcoming changes.
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