U.S. financial regulators propose flood insurance changes

WASHINGTON Fri Oct 11, 2013 1:18pm EDT

A general view of the U.S. Federal Reserve building in Washington, July 31, 2013. REUTERS/Jonathan Ernst

A general view of the U.S. Federal Reserve building in Washington, July 31, 2013.

Credit: Reuters/Jonathan Ernst

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WASHINGTON (Reuters) - U.S. financial regulators proposed requiring lenders to accept private flood insurance on Friday as part of rules needed to implement a 2012 law that revamps a federal flood insurance program.

The Biggert-Waters Flood Insurance Reform Act called for changes to a government-run program that allowed many homeowners to buy subsidized flood insurance, after lawmakers decided the program's costs had become unsustainable.

Five agencies, including the U.S. Federal Reserve and the Farm Credit Administration, issued proposals to implement portions of the law.

They called for lenders to put in escrow all flood insurance payments and fees for loans secured by residential real estate and said lenders could charge for force-placed insurance if borrowers let their own flood insurance lapse.

Flood insurance has been a thorny problem for U.S. officials. Private insurance companies often do not offer it, so the federal program, run by the Federal Emergency Management Agency, allowed homeowners to buy government-backed insurance if their communities adopted floodplain management ordinances and set minimum construction standards.

The 2012 law, which was passed before "superstorm" Sandy devastated much of the U.S. east coast, attempted to cut the program's costs by making changes to flood insurance, flood hazard mapping and the floodplain management.

Some lawmakers since have said the changes could unfairly cause flood insurance premiums to spike.

The financial regulators said their proposals apply only to the portions of the law that fall under their jurisdiction. The proposal will be available for public comment until December 10.

(Reporting by Emily Stephenson; Editing by L Gevirtz)

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Comments (2)
Barneybay wrote:
Stop FEMA Now is a group of concerned citizens, who have not only been affected by Hurricane Sandy, but who have been impacted on varying levels by the implications of the new FEMA flood maps. The decision to adopt these maps is premature and requires additional consideration. We want to, quite simply, Stop FEMA Now!

Our mission is to change FEMA policy to raise homes, lower Base Flood Elevations and Lower Flood Insurance Premiums.

Our goal is to create community awareness as the adoption of these maps will heavily impact many communities across this country. These maps will tear many from their homes, force many to make harsh decisions about their futures with no real place to turn and ultimately change our lives. The financial implications alone are frightening!

Stop FEMA Now is New Jersey based non-profit organization and is the “voice of the country”. We welcome everyone from all states to join and share information.

Please like us on Facebook.

Oct 11, 2013 11:22pm EDT  --  Report as abuse
elkaygee wrote:
As a realtor this will cause many homeowners in the floodplain to default on their mortgage as the homes will be difficult to sell and the premiums will be out of control ! I live in a river community in Pennsylvania that we are already getting quotes on $80,000 priced homes of flood insurance costs of $12000.00 per year ! I myself had a elevation certificate on my own home and I am a half inch in the flood plain and have to pay $1000.00 a year on a $70,000 line of credit ! Something has to be done ! We should not have to pay for FEMA”s mismanagement of funds and government red tape and inefficiency .

Oct 17, 2013 9:21am EDT  --  Report as abuse
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