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Legislative Analysis

Homeowner Flood Insurance Affordability Act of 2014

On March 13, 2014, Congress amended the 2012 Biggert-Waters law with the “Homeowner Flood Insurance Affordability Act,” HR 3370. President Obama signed the bill into law on March 21, 2014.

  • Repeals the Federal Emergency Management Agency’s (FEMA) authority to raise flood insurance rates at the time of property sale.
  • Returns to allowing buyers to assume the seller’s current rates so the rate stays/transfers with the property, not the owner.
  • Restores grandfathering so properties built and maintained to code in one flood zone are not rated in a higher cost zone, simply because FEMA corrects a mis-rating on a later flood map.
  • Caps premium increases at 18% annually for new properties or 25% for the older ones.
  • Refunds premiums paid by property owners in excess of rates under these amendments.

Originally, Biggert-Waters was supposed to gradually phase-out the subsidized rates for about 20% of property owners – half were to pay 25% more per year while the rest moved to the full cost for flood insurance upon purchase of an older property. However, FEMA did not issue the new rates for 15 months, allowing many to buy the property before they could be warned of the retroactive rate increase. Others saw wildly inaccurate rate quotes well above the intended 25% increase and that did not stand up to expert scrutiny. Most of these insurance rating discrepancies appeared to be the result of confusion caused by the scattershot implementation of the 2012 law.

The 2014 amendments should resolve most of the unintended consequences due to Biggert-Waters implementation. As amended, the law will still eliminate the rate subsidies, except that under these amendments, none of the 20% of owners will pay more than 25% a year -- even if someone buys the property. No more dramatic, upfront increases at the closing table. All increases will be capped and occur once a year when the flood insurance is renewed. To avoid further borrowing from taxpayers, a small assessment is placed on all NFIP policies until property owners are paying full cost for flood insurance.

To prevent inaccurate rate increases in the future, the amendments will:

  • Require technical review and certification of the flood insurance rate maps.
  • Create a flood insurance advocate for property owners to challenge faulty rates or maps.
  • Increase funding to reimburse property owners for successful flood map appeals.
  • Reduce rates based on flood-proofing or other alternative methods to elevating property.
  • Provide for a higher deductible up to $10,000 before flood losses are covered by insurance.

If any affordability issues remain after 18 months, particularly for low value homes, non-profits, churches, or small businesses, FEMA is to report to Congress and propose additional solutions, like means-tested vouchers. FEMA must also monitor implementation and complete a more comprehensive affordability study to help guide future congressional action.

FEMA has already implemented the rate relief and refund amendments and is currently working on the rest. NAR will continue to work with FEMA and Congress to fully implement these amendments consistent with congressional intent. NAR is urging swift implementation. Read more about NAR’s Political Advocacy efforts here.