Flood Insurance Deal To Stop Some Rate Hikes For Sandy Victims

Dated: 03/23/2014

Views: 6378

President Obama signed into law Friday a rare bipartisan compromise that repeals some of the mandatory flood insurance rate increases ordered in 2012.New Jersey supporters said the changes remove an impediment to homeowners rebuilding after Superstorm Sandy. The bill also was praised by the powerful real estate lobby, which said a part of the 2012 law created a home-sale trigger that immediately required buyers to pay significantly higher rates and effectively put a freeze on markets in parts of the country.Sen. Bob Menendez, a North Bergen Democrat, called the signing "a tremendous victory for thousands of New Jersey homeowners who were facing skyrocketing flood insurance costs as they continued to recover from the worst natural disaster in our state's history."The reversal by Congress was derided, however, by environmentalists and budget hawks who said the new law continues a flawed system that encourages development in places where it should not be encouraged and forces people facing less flood risk to subsidize those who face higher risks.Criticism also came from some who wanted Congress to go further and rescind all of the rate increases ordered in 2012. As it is, many will still happen, especially for older vacation homes and businesses on the Jersey Shore and primary homes that have had frequent flood claims, a category that includes many homes in the Passaic River basin."They didn't solve the problem; they delayed the misery a bit," said John Reilly, a real estate agent with Century 21 in Little Falls.The July 2012 law was designed to address what was then a $17 billion debt in the government-run program because of catastrophic losses from Hurricane Katrina in 2005. That debt grew to at least $24 billion because of the losses from Sandy in October 2012.To make the program more self-sustaining, Congress ordered FEMA to begin phasing out subsidized rates that had roughly one of every five insured properties paying premiums that, on average, cost 45 percent of the true risk faced by the property.Menendez, who was the lead sponsor of a Senate bill that would have postponed rather than repealed many of the increases, has said that getting a bill passed quickly required bipartisan cooperation, and there was no way both houses of Congress would reverse all of the 2012 changes. The Senate passed the bill 67-32 with support from both parties on Jan. 30.Rep. Frank LoBiondo, a Republican from Atlantic County who was part of a core group that pressed the House GOP leadership to support changes, said the bill almost died last month because of differences with hard-line conservatives, many of whom want to quickly end all subsidies and shut down government-run insurance.The House approved the bill 306-91 on March 4. The only member of the New Jersey delegation voting against it was Rep. Scott Garrett of Wantage, who was among 86 Republicans voting no.To eliminate huge rate increases triggered by home sales and to avoid a loss of revenue to the flood program, the compromise bill created a new $25 fee on primary home policies and a $250 fee on second homes and commercial properties.And since many homeowners hit with rate increases said they never knew they were getting subsidies in the first place, the new law requires more transparency. In the future, the Federal Emergency Management Agency is supposed to tell people both what they are being charged and what they could be charged if the full-risk rate were in place.Under the law Obama signed, homes built after 1975 to an elevation that at the time met flood codes will be able to keep lower rates even when new flood maps put them in riskier zones where rates should be higher.That is significant for New Jersey's efforts to rebuild from Sandy because new flood maps are also being developed for much of the state. Without a change in the law, homeowners faced a choice of waiting for the new maps or rebuilding to the current elevation and waiting to learn if a new map puts them in a higher-risk zone.Buyers can also continue to pay the rates that sellers were paying. If Congress had done nothing, premiums would increase when homes were sold. Real estate agents and members of Congress talked of buyers receiving quotes of $3,000, $5,000, $10,000 or more a year that made properties unsellable.-  Article courtesy of Herb Jackson Washington Correspondent for Northjersey.com

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