WASHINGTON — Less than two years after passing major legislation aimed at reforming the government's much-criticized flood insurance program, Congress on Thursday sent the president a bill to scale back many of the resulting big flood insurance premium increases faced by hundreds of thousands of homeowners including those on the New Jersey shore still cleaning up after Hurricane Sandy.
The measure would also allow below-market insurance rates to be passed on to people buying homes with taxpayer-subsidized policies.
The measure breezed through the Senate and on to President Barack Obama's desk by a 72-22 vote. The House, where the bill was drafted, passed the measure last week.
The 2012 law was designed to make the National Flood Insurance Program (NFIP) solvent after it went about $25 million in the hole due to Hurricane Katrina, but it did that by increasing flood insurance premiums up to 25 percent a year. The new measure would keep those increases to a range of 5 to 18 percent, with 15 percent being the average.
Rep. Frank LoBiondo, R-2nd, a strong supporter of the bill, called it a “common sense, fiscally responsible, bipartisan approach.” LoBiondo worked with New Jersey Sens. Robert Menendez and Cory Booker, both Democrats, on the issue during the past few weeks. LoBiondo said it will still make the program solvent, but it will take a longer period of time.
“It’s not perfect, but this fixes it and fixes it in a responsible way. It spreads it out over a longer period of time and still accomplishes solvency,” LoBiondo said.
Next to Obamacare, LoBiondo said the flood insurance issue is the biggest one in his district. He said the bill will relieve the anxiety of shore homeowners and the real estate industry.
LoBiondo had been criticized for voting for the 2012 bill that sharply raised premiums, but he said if the NFIP failed, then people could not get mortgages and titles could not be transferred.
The legislation significantly rewrites a major overhaul of the flood insurance program that passed almost unanimously in 2012. Those 2012 changes were aimed at weaning hundreds of thousands of homeowners off of subsidized rates and required extensive updating of the flood maps used to set premiums. But its implementation stirred anxiety among many homeowners along the Atlantic and Gulf coasts and in flood plains, many of whom are threatened with unaffordable rate increases.
Obama was expected to sign it into law despite a White House policy statement issued in January that criticized an earlier Senate bill that would have delayed implementation of the 2012 law.
Thursday's bill was written by House Majority Leader Eric Cantor, R-Va., and Rep. Michael Grimm, R-N.Y., with input from Democrats whose votes were critical to House passage last week.
The bill would repeal a provision in the 2012 law that threatens hundreds of thousands of homeowners with huge premium increases under new and updated government flood maps. Those homeowners currently benefit from below-market rates that are subsidized by other policyholders, and the new legislation would preserve their "grandfathered" status.
Another provision, eagerly sought by the real estate industry, would allow home sellers to pass taxpayer-subsidized policies on to the people buying their homes instead of requiring purchasers to pay actuarially sound rates immediately, as required by the 2012 law. The new rates are particularly high in older coastal communities in states such as Florida, Massachusetts and New Jersey, and have put a damper on home sales as prospective buyers recoil at the higher, multifold premium increases.
Anger over the higher rates has fueled a bipartisan drive to delay or derail many of the 2012 changes. The Senate took a different approach in January, passing a bill to delay the changes, which were aimed at putting the flood insurance program on sound financial footing. The flood program is presently $24 billion in the red, mostly because of huge losses from Hurricanes Katrina and Sandy.
The measure would also give relief to people who have bought homes after the changes were enacted in July 2012 and therefore face sharp, immediate jumps in their premiums; they would see those increases rolled back and may get some money back.
“Some people will get rebates,” LoBiondo said.
Sen. Mike Lee, R-Utah, opposed the measure but allowed Thursday's speedy vote in exchange for separate passage of a measure to repeal premium rebates for people who have bought beach houses and other second homes since the 2012 law was passed. He said Cantor has promised it will be voted on by the Republican-controlled House.
But people whose second homes are in a flood zone and those whose properties have flooded repeatedly would continue to see their premiums go up by 25 percent a year until reaching a level consistent with their real risk of flooding.
The White House did not issue an official policy statement on the measure but said during debate on the Senate bill that it still supported a phased-in transition to risk-based flood insurance rates to help ensure that the federal flood insurance program has adequate resources to pay future claims.
"The administration recognizes that many policyholders may be challenged financially by the new rates and remains committed to working with the Congress to develop approaches that ensure economically distressed policyholders are not unduly burdened while maintaining the financial stability" of the flood insurance program, the White House said in a Jan. 27 statement.
Some environmental groups also opposed the bill, saying climate change has increased the risk of flooding in coastal areas, making it illogical to continue to rebuild in flood zones.
The measure also would give relief to people who have bought homes after the 2012 overhaul. Those homeowners would see rate increases capped at an average of 15 percent, with a maximum of 18 percent a year.
The Federal Emergency Management Agency would retain the ability to increase premiums each year, but the increases wouldn't be as steep as required under the 2012 law. A $25 surcharge on each of 5.6 million policyholders would offset the cost of continued subsidies for about 1.1 million homeowners. Owners of second homes would pay a $250 surcharge.
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