Good News for Homeowners Requiring Flood Insurance

On March 4, 2014, the United States House of Representatives, in a 306 to 91 vote, passed H.R. 3370 aimed at scaling back the grossly escalated premiums for government-sponsored  flood insurance.  Supporters of the legislation applaud this action saying it will stem the effects of the ill-conceived increase in premiums and reinvigorate real estate markets in flood-prone areas.

In 2012, a law was passed mandating that the Federal Emergency Management Agency (FEMA) reset its insurance premiums to more accurately reflect “actuarially sound” rates.  This mandate caused steep increases in policy premiums (some jumping from $1,000 to $14,000 per year) that the average homeowner just cannot afford.  Stories emerged of homeowners who planned to simply walk away from their homes in flood-prone areas of the United States due to the unprecedented increases in flood insurance premiums.

The new legislation, which was received in the U.S. Senate and read for the first time on March 5, 2014, if signed into law, will repeal the provision of the 2012 law that triggered the premium increases if property were sold to a new owner.

The Senate may approve the legislation as received, reject it, ignore it, or amend it before passing it.  If amended, depending on the extent of the amendments, the legislation either goes back to the House for a concurring vote in the event of minor changes or, if significant changes are made, a conference committee is convened to reconcile the differences between the two bills into one bill.  If no agreement on a single bill is reached, the legislation dies.  If agreement is reached, a conference report is prepared describing the recommended changes.  The revised legislation then goes to the House and the Senate for approval. If either chamber rejects the revised legislation, it dies.  If both the House and the Senate approve the revised legislation, the final bill is sent to the President.  He may either approve it by signing it into law, or he may take no action for ten days while Congress is in session, in which case the bill automatically becomes law.  If the President opposes the bill, he can veto it while Congress is in session, or take no action after Congress has adjourned its second session (“pocket veto”), in which case the legislation dies.  Congress may override a presidential veto with a two-thirds roll call vote of the members present provided they constitute a quorum.