Homeowner Flood Insurance Affordability Act (HR 3370) Bill Approved to Curb Flood Insurance Hikes!

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Homeowner Flood Insurance Affordability Act (HR 3370) Bill Approved to Curb Flood Insurance Hikes!

On March 21, 2014, President Obama signed the Homeowner Flood Insurance Affordability Act (HR 3370) passing the bill into law. This law reduces some of the reforms made to the insurance program that was passed two years ago.  Here are some differences with the new law:

Creates a firewall on annual rate increases  – Prevents FEMA from raising the average rates for a class of properties above 15% and from raising rates on individual policies above 18% per year for virtually all properties.

 Repeals the property sales trigger  – Repeals the provision in Biggert-Waters that required homebuyers to pay the full-risk rate for pre-FIRM properties at the time of purchase. This provision caused property values to steeply decline and made many homes unsellable, hurting the real estate market. Under the Menendez/Grimm Bill, homebuyers will receive the same treatment as the home seller.

Repeals the new policy sales trigger  – Repeals the provision in Biggert-Waters that required pre-FIRM property owners to pay the full-risk rate if they voluntarily purchase a new policy. This provision disincentivizes property owners from making responsible decisions and could hurt program participation. The Menendez/Grimm Bill allows pre-FIRM property owners to voluntarily purchase a policy under pre-FIRM conditions.

Reinstates grandfathering  – Repeals the provision in Biggert-Waters that would have terminated grandfathering. If grandfathering was terminated, property owners mapped into higher risk would have to either elevate their structure or have higher rates phased in over 5 years. The Menendez/Grimm Bill allows grandfathering to continue and sets hard caps on how high premiums can increase annually.

Refunds homeowners who overpaid  – Requires FEMA to refund policyholders for overpaid premiums.

Affordability goal  – Requires FEMA to minimize the number of policies with annual premiums that exceed one percent of the total coverage provided by the policy.

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