WASHINGTON — The National Association of Realtors is teaming up with a coalition of environmental groups, taxpayer advocates and insurance companies to push Congress on flood insurance reforms.
The current authorization for the National Flood Insurance Program does not expire until September 2017, but the Realtors and the SmarterSafer Coalition are undertaking a major effort to pass legislation this year that could open the door for the development of a private mortgage insurance market.
"Our hope is with the private sector becoming more engaged in the flood insurance marketplace, more homeowners will obtain coverage than the current 5 million homeowners today," said Steve Ellis, vice president of Taxpayers for Common Sense, who spoke at a press conference earlier this month on the issue.
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Regulators finalized a rule Monday requiring banks to escrow flood insurance premiums and fees for loans on real estate located in a flood zone.
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The sheer volume of regulations adds time and expense to closings without much benefit when consumers main interest is to get funds as quickly as possible.
March 22 -
Ocwen Financial and Assurant have reached an agreement to settle charges that the embattled mortgage servicer profited from kickbacks on force-placed insurance policies with struggling homeowners.
April 30
The taxpayer group, a member of the coalition, is concerned that the National Flood Insurance Program is $23 billion in debt and is still offering flood insurance policies at subsidized rates.
The National Wildlife Federation, another coalition participant, is worried that the Federal Emergency Management Agency is not doing enough in terms of flood mitigation to reduce flood damage.
"FEMA already has flood mitigation programs that need to bolstered and adequately funded," said Josh Saks, legislative director for the conservation group.
Protecting wildlife habitat is the "best flood control and flood protection money can buy," said Saks, who also spoke at the conference.
Real estate agents and the coalition are backing a bill co-sponsored by Reps. Dennis Ross, R-Fla., and Patrick Murphy, D-Fla., that would allow state insurance commissioners to approve flood insurance policies that can provide coverage on Fannie Mae, Freddie Mac and other federally backed mortgages.
The bill cleared the House Financial Services Committee last month by a 53-0 vote. Its supporters hope the full House will take it up soon.
House passage could prompt the Senate Banking Committee to take up a similar measure co-sponsored by Sens. Dean Heller, R-Nev., and Jon Tester, D-Mont.
Congress passed a flood insurance reform bill in 2012, called the Biggert-Waters Flood Insurance Act, that directed the banking regulators to approve private flood insurance policies.
But the statute, named after Reps. Judy Biggert, R-Ill., and Maxine Waters, D-Calif., did not provide clear guidance for the banking regulators and the end product was not attractive to private insurers.
Teresa Miller, the insurance commissioner for Pennsylvania, told a House Financial Services subcommittee earlier this year that it was "inappropriate" to give banking regulators authority to regulate insurance products since they lack expertise or experience in those markets.
The bill "includes language clarifying that state insurance regulators have the same authority and discretion to regulate private flood insurance as they have to regulate other insurance products and markets," Miller told the panel earlier this year on behalf of the National Association of Insurance Commissioners.
A key provision in the Ross-Murphy bill would encourage homeowners with federal flood insurance to sign up for private flood insurance if they can get a better policy.
The legislation essentially grandfathers a homeowner's federal flood insurance rate provided there is no lapse in insurance coverage.
This "continuous coverage" provision makes it possible for homeowners to switch from a federal flood insurance policy to a state-approved policy and back again without jeopardizing their previously grandfathered rate.
It is not only designed to encourage homeowners to consider more attractive private flood insurance policies but protects them if a private insurer starts hiking their rates.
Supporters of the flood insurance bill want House leaders to place it on the suspension calendar so that it can be passed soon.
"It needs to move forward soon," Ellis said, so "we have some understanding of how this is going to work leading into reauthorization" of the federal flood insurance program next year. "That can help inform that process."
The Realtors also want the reauthorization process to go smoothly because it has been contentious in the past and it can be disruptive to the real estate market.
The last time lawmakers couldn't agree on a reauthorization bill was in the middle of 2010 and the legislative stalemate blocked 40,000 sale closings a month, according to Maria Wells, who chairs the Realtors' insurance committee.
If real estate agents, taxpayer advocates and environmental groups can come together, "then we feel the lawmakers need to do the same and reach across the aisle and make this work so that homeowners are protected," Wells said at the press briefing.
