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A new House vision for flood revamp

By Jay MacDonald · Bankrate.com
Friday, February 28, 2014
Posted: 6 am ET

Dear coastal homeowners:

I know you won't believe this, but relief may be heading your way as early as next week from the staggering flood insurance rate increases you're suffering under that C-minus term paper of flood insurance reform, the 2012 Biggert-Waters Act.

And you won't believe where it's coming from: the U.S. Congress!

I know: You've heard this song before. Yadda, yadda, yadda.

But the reason this fix-to-a-fix is different is that there now appear to be enough similarities between the Senate-passed bill and this new House proposal to coax from hiding that sasquatch of Capitol Hill, compromise.

Plan would limit premium increases

Last month, you may recall, the Senate approved its plan, which would delay implementation of Biggert-Waters for four years to allow time for the Federal Emergency Management Agency, or FEMA, to study the economic impact of the National Flood Insurance Program's new flood maps.

Or they could just call you collect, am I right?

Anyway, the House version that poked up its head this week, while outright rejecting any such kick-the-can approach, does propose a gentler glide path to reducing those low subsidized flood rates that hundreds of thousands of older homes have enjoyed for years at the NFIP's expense. Specifically, it would limit annual increases in a single risk class to 5 to 15 percent, on average, as opposed to 25 percent.

I can't quite figure why the House also proposes to keep subsidies intact for homes that are affected by flood map revisions, nor am I sure why they decided to start further trouble by proposing additional assessments of $25 on NFIP policyholders and $250 on commercial properties, to try to erase NFIP's $24 billion debt.

Steep rate hikes still possible

But let's not quibble at this point. The important development is that the House version would no longer automatically cut off those decades-old subsidies when a home is sold, as Biggert-Waters has done to such disastrous effect in some coastal home markets.

I know: If you're steaming mad that your flood insurance stands to jump from $800 a year to 20 times that, as it still could under this fix, you're not exactly going to rush out and hug your local representative. Flood rates for second homes or properties with multiple claims also could still face 25 percent increases until they reach what NFIP considers an actuarially sound level.

But if this fix, which claims bipartisan support, should clear a full House vote next week, there could be enough room for negotiation to enable Congress to finally fix, however imperfectly, the perfect mess it unwittingly created two years ago.

Follow me on Twitter: @omnisaurus.

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