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Blog: House passes flood-insurance bill

The debate over tax reform got most of the press this week, but Congress took up another issue that is important to the mortgage and housing industry.

On Tuesday, the U.S. House of Representatives passed a bill to reauthorize for five years and reform the National Flood Insurance Program (NFIP), the program that most Americans with homes in flood-prone areas rely on to obtain reasonably priced flood insurance.

flooddevastate(1)This has been one of the higher priority issues for Realtors, builders and mortgage-industry trade groups. A temporary extension of the flood program is slated to end on Dec. 8. The housing lobby says a lapse in the NFIP could disrupt home sales, particularly in coastal areas that have been repeatedly slammed by hurricanes. The National Association of Realtors (NAR), for example, estimates that 40,000 home sales are lost in each month that flood insurance is unavailable.

Homeowners in areas that have been hit by repeated flooding often can’t close on a federally-backed loan unless they obtain flood insurance. This is why the mortgage industry cares about this issue.

The flood program is riddled with problems, however. After a string of catastrophic storms dating back to Katrina, the NFIP is now more than $20.5 billion in debt, even after Congress decided in October to forgive $16 billion in debt when claims started piling up from devastated homes in Texas and the Gulf coast in the wake of hurricanes Harvey and Irma.

The House bill, H.R. 2874, dubbed the “21st Century Flood Reform Act,”  passed by a vote of  237-189 on Tuesday. Some GOP representatives in coastal areas joined Democrats in opposing the bill, believing it would lead to higher premiums and less access to flood insurance in their home states.

Among other reforms, the House bill attempts to provide a boost to the undeveloped private flood-insurance market, updates flood mapping and spurs changes that better align the actual cost of the premiums to the flood risk. It is probably more significant that the House passed an extension of the bill, than its fine details. Some Senate GOP leaders have already said they don’t support certain provisions. The final bill could look much different.

The mortgage and housing lobby praised its passage as a significant milestone, however.

“The conversation happening in Washington on this issue is fundamentally about how we deliver the best results for consumers and taxpayers, and that’s a good conversation to have,” NAR President Elizabeth Mendenhall said.

“Realtors are simply asking that Congress swiftly deliver on the promise of this program so buyers can move forward without interruption and homeowners know their most important asset is protected,” she continued. “With Dec. 8 around the corner, we’re hopeful the Senate will now step up to the plate and do their part by passing a flood-reform and reauthorization package without delay.”


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