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Insurance professionals may be interested to know that the US Senate has voted against flood insurance reforms. The bill, Homeowner Flood Insurance Affordability Act of 2013, will effectively curb any increase in flood insurance premiums. It was passed on March 4.

The bill amends a few provisions of the 2012 Biggert-Waters Flood Insurance Reforms Act, which caused premiums to go up in certain areas of America.

The bill also reinstates government subsidies for properties that were purchased and sold before the Flood Insurance Rate Maps (FIRM) were available.

The Menendez-Grimm bill will now go to President Obama. The White House, however, has expressed concerns about rolling back some of the flood insurance reforms proposed by Biggert-Waters.

While the new bill had the backing of realtors, builders, lenders, and homeowners; some taxpayer and environmental groups were against it. In addition, the new bill will prevent the entry of private insurers into the flood insurance market. Private insurance companies have been demanding the abolition of subsidized rates for a while.

The National Association of Mutual Insurance Companies (NAMIC) said that it was disappointed by the bill. Independent agents, on the other hand, supported the bill. Rate hikes will make flood insurance unaffordable. It may also cause a drop in home values.

Here is a summary of the bill.

The bill prevents premiums from going through the roof. There is a ceiling on annual rate hikes. The bill prevents FEMA from increasing the average premiums for a particular kind of properties beyond 15 percent. The premiums on individual policies cannot be increased by more than 18% per year.

The bill repealed Biggert-Waters provision which required property buyers to pay full-risk premiums for properties bought and sold before flood maps were available. This provision had caused property prices to drop and affected the realty sector.

Grandfathering

The bill reinstates grandfathering. If this was abolished, property owners in high risk areas would either have to elevate their home or pay higher premiums. The new bill also asks FEMA to refund insurance policyholders who overpaid their premiums.

Affordability

The bill requires FEMA to limit the number of flood insurance policies whose annual premiums exceed 1% of the total flood coverage offered by the policy.

Extra features

The bill gives FEMA the right to use the National Flood Insurance Funds to reimburse policyholders who appeal a map finding successfully.

The bill also provides for the establishment of a Flood Insurance Advocate. The Flood Insurance Advocate will answer policyholders' questions about flood mapping processes and flood insurance premiums.

Urban mitigation fairness

This provision requires FEMA to suggest guidelines on alternative methods to mitigate risks where traditional methods are not practical.

Clear communication

FEMA has to communicate full flood risks to policyholders regardless of whether they pay full-risk premiums or not. This helps them assess their full flood risk.

FEMA has to report to US Congress what impact rate hikes will have on small businesses, places of worship and non-profits whose values are less than 25 percent of area median property value.

Mapping accuracy

FEMA has to certify that its mapping processes are technologically sophisticated. It also has to prove that the mapping models it uses to create the flood map of an area are appropriate. FEMA has to make the underwriting guidelines and rate tables publicly available.

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