Schumer Bill – Homeowner Flood Insurance Affordability Act – Will Protect Homeowners From Flood Insurance Rate Spike Until FEMA Completes An Affordability Study & Implements Real Changes to Address Affordability Issues
First, Schumer Plan Will Aid Thousands of Upstate Homeowners Who Want to Sell Their Homes, But Discover Their Property Values Are Being Decimated Because New Buyers Face Immediate Premium Spikes – Second, Plan Will Prevent Homeowners From Facing Drastically Higher Premiums as Dozens of NY Counties Get Remapped by FEMA in Coming Years
Schumer: FEMA Must Complete Overdue Affordability Study to Ensure People Aren’t Forced to Choose Between Breaking the Bank & Leaving Their Home
New York, NY – November 14, 2013 – (RealEstateRama) — On a press conference call, U.S. Senator Charles E. Schumer announced bipartisan legislation, the Homeowner Flood Insurance Affordability Act, which will protect up to 11,000 Upstate New York homeowners from facing potentially huge flood insurance premium rate hikes, and over 20,000 more from seeing their property values decimated – as a result of higher premiums facing any new buyer – when they try to sell. Schumer’s legislation would require FEMA to complete an affordability study and propose real solutions to address affordability issues before flood insurance premiums can be raised for most homeowners. This study is intended to help ensure that flood insurance is accurate and affordable so that people aren’t forced to choose between breaking the bank and leaving the neighborhood they call home. Schumer said that his legislation, which will help protect many groups of homeowners from increased flood insurance rates imposed by the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters), has strong bipartisan support that is growing as more people across the country face higher premiums and threats to property values.
Schumer said that homeowners in Upstate New York should not experience premature flood rate increases before the long-delayed FEMA affordability study, required by Congress, has been completed. Schumer also pointed out that the flood insurance program will be less fiscally sound if rates spike before addressing affordability, and people are forced to drop out of the flood insurance program altogether.
“Residents are still recovering from the destructive force of Irene, Lee, Sandy and the serious flooding in June of this year, and they should not be forced to face unaffordable premiums as well,” said Schumer. “We have to prevent the most devastating flood rate hikes on Upstate New Yorkers until FEMA can figure out a way to make the National Flood Insurance Program fiscally solvent, without breaking the bank for middle-class homeowners. Instituting rate hikes before the affordability study can be completed is putting the cart before the horse, plus those homeowners that are ultimately affected should have adequate time to plan for the rate increases, that are both accurate and affordable. This legislation would accomplish both.”
Already in Upstate New York, particularly in areas that have experienced recent flooding, homeowners are beginning to see rate increases on their flood insurance premiums. In Oneida, Oswego, Broome and Chemung Counties, and across the Mohawk, Hudson and Schoharie Valleys, the upward revisions of risk in flood maps have already been reported to have caused severe rate hikes. Without delay of the some of the most damaging provisions of Biggert-Waters, Schumer explained that more rate hikes and loss of property value are on the way.
The most immediate impact is being felt as homeowners with “Pre-FIRM subsidized” policies, of which there are about 21,389 in Upstate New York, when they seek to sell their homes. The buyers of these homes are required to immediately pay full risk rates for flood insurance, which can be thousands of dollars higher than the current homeowner is paying. This is having a devastating impact on property values. Some estimates show that home prices can decline $20 for every dollar increase in insurance premiums, meaning that a $1,000 increase in flood insurance premiums could wipe out $20,000 in value.
Existing homeowners who have “grandfathered” policies will face premium increases as their communities adopt new flood maps. There are as many as 11,808 properties with grandfathered policies in Upstate New York right now. They will face premium increases of up to 20% per year if their community adopts a new flood map, until they reach what FEMA considers to be full risk rates. Those rates can be as high $10,000 or even $20,000 per year in some cases. Dozens of Upstate New York counties will be remapped by FEMA in the coming years, and could face higher premiums when the new maps are adopted.
Specifically, Schumer’s legislation would delay the implementation of Biggert-Waters for three categories of property owners:
· Homeowners who have “Pre-FIRM subsidized” policies and will see their property values decline drastically when they go to sell their properties, because the buyers will be forced to pay higher rates immediately. These are properties that were built before the implementation of their area’s first flood map and were permitted to pay a special low rate.
· Homeowners whose rates were “grandfathered in” and will face phased-in higher premiums when their community is remapped by FEMA. Grandfathered policies are those where the property was originally built to code and complied with existing flood maps, but are in a community that has since had their flood risk revised upwards. These homeowners were previously able to keep their previous rates.
· Homeowners who purchase a new policy after Biggert-Waters was instituted on July 6, 2012.
Across Upstate New York 11,808 people are at risk for sky high rate increases once flood maps are redrawn, and 21,389 people would see their home values plummet unless a delay is passed:
· In the Capital Region, there are up to 1,141 policies that are at risk of higher premiums and 2,988 policies at risk at point-of-sale
· In Western New York, there are up to 1,719 policies that are at risk of higher premiums and 2,855 policies at risk at point-of-sale
· In the Rochester-Finger Lakes Region, there are up to 1,225 policies that are at risk of higher premiums and 2,614 policies at risk at point-of-sale
· In the Southern Tier, there are up to 1,976 policies that are at risk of higher premiums and 3,930 policies at risk at point-of-sale
· In Central New York, there are up to 1,156 policies that are at risk of higher premiums and 3,003 policies at risk at point-of-sale
· In the Hudson Valley, there are up to 4,138 policies that are at risk of higher premiums and 4,918 policies at risk at point-of-sale
· In the North Country, there are up to 453 policies that are at risk of higher premiums and 1,081 policies at risk at point-of-sale
The legislation delays the implementation of rate increases on the three types of properties until FEMA meets two requirements: 1) it completes the affordability study mandated by the Biggert-Waters Flood Insurance Reform Act of 2012, proposes a draft affordability framework for Congressional review, and Congress has a chance to give FEMA affordability authority; and 2) the FEMA Administrator certifies that the agency has implemented a flood mapping approach that utilizes sound scientific and engineering methodologies to determine varying levels of flood risk in all areas participating in the National Flood Insurance Program. FEMA has estimated it will take at least two years to complete the affordability study before a draft regulatory framework can be provided to Congress.
The “Homeowner Flood Insurance Affordability Act” was introduced by Sen. Landrieu (D-LA) and is sponsored by Robert Menendez (D-NJ) and Johnny Isakson (R-GA) and co-sponsored by Senator Chuck Schumer (D-NY), and 18 other Senators. Supporters of the delay in the House, including cosponsor Congressman Grimm, voted 281-145 earlier this year on an amendment to postpone premium increases