[House Report 115-255]
[From the U.S. Government Publishing Office]
115th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 115-255
======================================================================
TAXPAYER EXPOSURE MITIGATION ACT OF 2017
_______
July 25, 2017.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 2246]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 2246) to repeal the mandatory flood insurance
coverage requirement for commercial properties located in flood
hazard areas and to provide for greater transfer of risk under
the National Flood Insurance Program to private capital and
reinsurance markets, and for other purposes, having considered
the same, report favorably thereon with an amendment and
recommend that the bill as amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Taxpayer Exposure Mitigation Act of
2017''.
SEC. 2. OPT-OUT OF MANDATORY COVERAGE REQUIREMENT FOR COMMERCIAL
PROPERTIES.
(a) Amendments to Flood Disaster Protection Act of 1973.--The Flood
Disaster Protection Act of 1973 is amended--
(1) in section 3(a) (42 U.S.C. 4003(a))--
(A) in paragraph (10), by striking ``and'' at the
end;
(B) in paragraph (11), by striking the period at the
end and inserting ``; and''; and
(C) by adding at the end the following new paragraph:
``(12) `residential improved real estate' means improved real
estate that--
``(A) is primarily used for residential purposes, as
defined by the Federal entities for lending regulation;
and
``(B) secures financing or financial assistance
provided through a federally related single family loan
progam, as defined by the Federal entities for lending
regulation.''; and
(2) in section 102 (42 U.S.C. 4012a)--
(A) in subsection (b)--
(i) in paragraph (1)(A)--
(I) by inserting ``residential''
before ``improved real estate''; and
(II) by inserting ``residential''
before ``building or mobile home'';
(ii) in paragraph (2)--
(I) by inserting ``residential''
before ``improved real estate''; and
(II) by inserting ``residential''
before ``building or mobile home''; and
(iii) in paragraph (3)--
(I) in subparagraph (A), by inserting
``residential'' before ``improved real
estate''; and
(II) in the matter after and below
subparagraph (B), by inserting
``residential'' before ``building or
mobile home'';
(B) in subsection (c)(3), by striking ``, in the case
of any residential property, for any structure that is
a part of such property'' and inserting ``for any
structure that is part of a residential property'';
(C) in subsection (e)--
(i) in paragraph (1)--
(I) by inserting ``residential''
before ``improved real estate''; and
(II) by inserting ``residential''
before ``building or mobile home'' each
place such term appears; and
(ii) in paragraph (5)--
(I) in subparagraph (A)--
(aa) by inserting
``residential'' before
``improved real estate'' each
place such term appears; and
(bb) by inserting
``residential'' before
``building or mobile home''
each place such term appears;
(II) in subparagraph (B), by
inserting ``residential'' before
``building or mobile home'' each place
such term appears; and
(III) in subparagraph (C), by
inserting ``residential'' before
``building or mobile home''; and
(D) in subsection (h)--
(i) by inserting ``residential'' before
``improved real estate'' each place such term
appears; and
(ii) in the matter preceding paragraph (1),
by inserting ``residential'' before ``building
or mobile home''.
(b) Amendments to National Flood Insurance Act of 1968.--The National
Flood Insurance Act of 1968 is amended--
(1) in section 1364(a) (42 U.S.C. 4104a(a))--
(A) in paragraph (1), by inserting ``residential''
before ``improved real estate'';
(B) in paragraph (2), by inserting ``residential''
before ``improved real estate''; and
(C) in paragraph (3)(A), by inserting ``residential''
before ``building'';
(2) in section 1365 (42 U.S.C. 4104b)--
(A) in subsection (a)--
(i) by inserting ``residential'' before
``improved real estate''; and
(ii) by inserting ``residential'' before
``building'';
(B) in subsection (b)(2)--
(i) by inserting ``residential'' before
``building'' each place such term appears; and
(ii) by inserting ``residential'' before
``improved real estate'' each place such term
appears;
(C) in subsection (d), by inserting ``residential''
before ``improved real estate'' each place such term
appears; and
(D) in subsection (e)--
(i) by inserting ``residential'' before
``improved real estate''; and
(ii) by inserting ``residential'' before
``building'' each place such term appears; and
(3) in section 1370 (42 U.S.C. 4121)--
(A) in paragraph (8), by inserting ``residential''
before ``improved real estate'';
(B) by redesignating paragraphs (14) and (15) as
paragraphs (15) and (16), respectively; and
(C) by inserting after paragraph (13) the following
new paragraph:
``(14) the term `residential improved real estate' means
improved real estate that--
``(A) is primarily used for residential purposes, as
defined by the Federal entities for lending regulation;
and
``(B) secures financing or financial assistance
provided through a federally related single family loan
progam, as defined by the Federal entities for lending
regulation;''.
(c) Rule of Construction.--This section and the amendments made by
this section may not be construed to prohibit the Administrator of the
Federal Emergency Management Agency from offering flood insurance
coverage under the National Flood Insurance Program for eligible non-
residential properties, other residential multifamily properties, or
structures financed with commercial loans, or to prohibit the purchase
of such coverage for such eligible properties.
SEC. 3. RISK TRANSFER REQUIREMENT.
Subsection (e) of section 1345 of the National Flood Insurance Act of
1968 (42 U.S.C. 4081(e)) is amended--
(1) by striking ``(e) Risk Transfer.--The Administrator'' and
inserting the following:
``(e) Risk Transfer.--
``(1) Authority.--The Administrator''; and
(2) by adding at the end the following new paragraph:
``(2) Required risk transfer coverage.--
``(A) Requirement.--Not later than the expiration of
the 18-month period beginning upon the date of the
enactment of this paragraph and at all times
thereafter, the Administrator shall annually cede a
portion of the risk of the flood insurance program
under this title to the private reinsurance or capital
markets, or any combination thereof, and at rates and
terms that the Administrator determines to be
reasonable and appropriate, in an amount that--
``(i) is sufficient to maintain the ability
of the program to pay claims; and
``(ii) manages and limits the annual exposure
of the flood insurance program to flood losses
in accordance with the probable maximum loss
target established for such year under
subparagraph (B).
``(B) Probable maximum loss target.--The
Administrator shall for each fiscal year, establish a
probable maximum loss target for the national flood
insurance program that shall be the maximum probable
loss under the national flood insurance program that is
expected to occur in such fiscal year.
``(C) Considerations.--In establishing the probable
maximum loss target under subparagraph (B) for each
fiscal year and carrying out subparagraph (A), the
Administrator shall consider--
``(i) the probable maximum loss targets for
other United States public natural catastrophe
insurance programs, including as State wind
pools and earthquake programs;
``(ii) the probable maximum loss targets of
other risk management organizations, including
the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation;
``(iii) catastrophic, actuarial, and other
appropriate data modeling results of the
national flood insurance program portfolio;
``(iv) the availability of funds in the
National Flood Insurance Fund established under
section 1310 (42 U.S.C. 4017);
``(v) the availability of funds in the
National Flood Insurance Reserve Fund
established under section 1310A (42 U.S.C.
4017a);
``(vi) the availability of borrowing
authority under section 1309 (42 U.S.C. 4016);
``(vii) the ability of the Administrator to
repay outstanding debt;
``(viii) amounts appropriated to the
Administrator to carry out the national flood
insurance program;
``(ix) reinsurance, capital markets,
catastrophe bonds, collateralized reinsurance,
resilience bonds, and other insurance-linked
securities, and other risk transfer
opportunities; and
``(x) any other factor the Administrator
determines appropriate.
``(D) Multi-year contracts.--Nothing in this
paragraph may be construed to prevent or prohibit the
Administrator from complying with the requirement under
subparagraph (A) regarding ceding risk through
contracts having a duration longer than one year.''.
SEC. 4. COMMUNITY FLOOD MAPS.
(a) Technical Mapping Advisory Council.--Section 100215 of the
Biggert-Waters Flood Insurance Reform Act of 2012 (42 U.S.C. 4101a) is
amended--
(1) in subsection (c)--
(A) in paragraph (5)(B), by striking ``and'' at the
end;
(B) by redesignating paragraph (6) as paragraph (9);
and
(C) by inserting after paragraph (5) the following
new paragraphs:
``(6) recommend to the Administrator methods or actions to
make the flood mapping processes more efficient;
``(7) recommend to the Administrator methods or actions to
minimize any cost, data, and paperwork requirements of the
flood mapping processes;
``(8) assist communities, and in particular smaller
communities, in locating the resources required to participate
in the development of flood elevations and flood hazard area
designations; and''; and
(2) by adding at the end the following new subsection:
``(m) Community Flood Maps.--
``(1) Standards and procedures.--In addition to the other
duties of the Council under this section, not later than the
expiration of the 12-month period beginning on the date of the
enactment of this subsection, the Council shall recommend to
the Administrator standards and requirements for chief
executive officers, or entities designated by chief executive
officers, of States and communities participating in the
National Flood Insurance Program to use in mapping flood
hazards located in States and communities that choose to
develop alternative maps to the flood insurance rate maps
developed by the Agency. The recommended standards and
requirements shall include procedures for providing
notification and appeal rights to individuals within the
communities of the proposed flood elevation determinations.
``(2) Exemption from rulemaking.--Until such time as the
Administrator promulgates regulations implementing paragraph
(1) of this subsection, the Administrator may, notwithstanding
any other provision of law, adopt policies and procedures
necessary to implement such paragraphs without undergoing
notice and comment rulemaking and without conducting regulatory
analyses otherwise required by statute, regulation, or
executive order.''.
(b) FEMA Identification of Flood-prone Areas.--Subsection (a) of
section 1360 of the National Flood Insurance Act of 1968 (42 U.S.C.
4101(a)) is amended--
(1) in paragraph (2), by striking the period at the end and
inserting ``; and'';
(2) by redesignating paragraphs (1) and (2) as subparagraphs
(A), and (B), respectively, and realigning such subparagraphs
so as to be indented 4 ems from the left margin;
(3) by striking ``is authorized to consult'' and inserting
the following: ``is authorized--
``(1) to consult'';
(4) by adding at the end the following new paragraph:
``(2) to receive proposed alternative maps from communities
developed pursuant to standards and requirements recommended by
the Technical Mapping Advisory Council, as required by section
100215(m) of the Biggert-Waters Flood Insurance Reform Act of
2012 (42 U.S.C. 4101a(m)) and adopted by the Administrator as
required by section 100216(c)(3) of such Act (42 U.S.C.
4101b(c)(3)), so that the Administrator may--
``(A) publish information with respect to all flood
plain areas, including coastal areas located in the
United States, which have special flood hazards, and
``(B) establish or update flood-risk zone data in all
such areas, and make estimates with respect to the
rates of probable flood caused loss for the various
flood risk zones for each of these areas until the date
specified in section 1319.''.
(c) National Flood Mapping Program.--Section 100216 of the Biggert-
Waters Flood Insurance Reform Act of 2012 (42 U.S.C. 4101b) is
amended--
(1) in subsection (a), by inserting ``prepared by the
Administrator, or by a community pursuant to section 1360(a)(2)
of the National Flood Insurance Act of 1968,'' after ``Program
rate maps'';
(2) in subsection (c)--
(A) in paragraph (1)(B), by striking ``and'' at the
end;
(B) in paragraph (2)(C), by striking the period at
the end and inserting a semicolon; and
(C) by adding at the end the following new
paragraphs:
``(3) establish and adopt standards and requirements for
development by States and communities of alternative flood
insurance rate maps to be submitted to the Administrator
pursuant to section 1360(a)(2) of the National Flood Insurance
Act of 1968, taking into consideration the recommendations of
the Technical Mapping Advisory Council made pursuant to section
100215(m) of this Act (42 U.S.C. 4101a(m)); and
``(4) in the case of proposed alternative maps received by
the Administrator pursuant to such section 1360(a)(2), not
later than the expiration of the 6-month period beginning upon
receipt of such proposed alternative maps--
``(A) determine whether such maps were developed in
accordance with the standards and requirements adopted
pursuant to paragraph (3) of this subsection; and
``(B) approve or disapprove such proposed maps for
use under National Flood Insurance Program.''; and
(3) in subsection (d)(1), by inserting ``maximum'' before
``30-day period'' each place such term appears in subparagraphs
(B) and (C).
Purpose and Summary
Introduced on April 28, 2017, by Representative Blaine
Luetkemeyer, H.R. 2246, the ``Taxpayer Exposure Mitigation Act
of 2017'', amends the Flood Disaster Protection Act of 1973 to
repeal the mandatory flood insurance coverage requirement for
commercial properties located in flood hazard areas and to
provide for greater transfer of risk under the National Flood
Insurance Program to private capital and reinsurance markets,
and for other purposes.
Background and Need for Legislation
Floods are among the most frequently occurring and costly
natural disasters. Most declarations of federal disasters by
the Federal Emergency Management Agency (FEMA) are related to
flooding. Yet despite the frequency and severity of losses that
result from flooding, the private insurance market generally
did not provide insurance for flooding; when it did, insurance
for flood-related damage can be expensive because the
properties most at-risk tend to be highly concentrated
geographically and the potential risk of economic losses is
extremely high.
To supplement the availability of flood insurance in the
private market, Congress, in 1968, created the National Flood
Insurance Program (NFIP), which is administered by FEMA and
provides flood insurance to approximately 5.1 million
policyholders across the country. In exchange for premiums paid
by policholders, NFIP makes federally backed flood insurance
available to homeowners and other property owners (for example,
businesses, churches, and farmers) in these communities.
Homeowners with mortgages held by federally regulated
lenders on property in participating communities identified by
FEMA to be in Special Flood Hazard Areas are required to
purchase flood insurance (mandatory purchase requirement). NFIP
coverage limits vary by program (regular or emergency) and
property type (for example, residential or nonresidential). In
NFIP's regular program, the maximum coverage limits for
residential policyholders are $250,000 for buildings and
$100,000 for contents. For commercial policyholders (that is,
those with policies for nonresidential properties), the maximum
coverage limit is $500,000 per building and $500,000 for
contents owned by the building owner. There is additional
coverage for contents owned by the tenants.
Residents and business owners in over 22,000 participating
communities across the United States and its territories are
able to buy NFIP flood insurance policies through insurance
agents and companies that participate as third-party
administrators in the ``Write Your Own'' (WYO) program. The WYO
program allows private insurance carriers to issue and service
government underwritten and taxpayer backed NFIP policies with
no private financial liability from the insurer. Insurance
companies that participate in the WYO program receive an
expense allowance for policies they write and the claims they
process. In addition, their agents earn a commission for the
policies they sell. The federal government, however, retains
responsibility for managing the risk and paying claims, as well
as covering any litigation costs should a WYO insurer be sued
in court.
Property owners can purchase flood insurance through the
NFIP only if their communities participate in the NFIP. To
participate in the NFIP, a community must agree to abide by
certain statutory provisions intended to mitigate the risk of
flooding, such as building codes that require new structures
built in floodplains (high-risk areas) to be protected against
flooding or to be elevated above the 100-year floodplain.
As of June 5, 2017, the NFIP has an outstanding debt of
$24.6 billion borrowed from taxpayers, with roughly $1.1
billion available cash-on-hand and $5.825 billion remaining of
its total temporary $30.425 billion Treasury borrowing
authority. The NFIP's debt results primarily from its borrowing
to pay claims relating to the Gulf Coast hurricanes in 2005 and
Superstorm Sandy in October 2012. This borrowing stems from a
structural imbalance in how the NFIP measures and prices for
risk, resulting in only 46 percent of premium dollars collected
in 2016 being available for the payments of claims. With such a
low portion of premiums available to pay claims, the pressure
on the NFIP to borrow from taxpayers increases. The NFIP's
structural budget crisis has required periodic legislation to
increase its borrowing authority, the most recent example of
which occurred in January 2013 when Congress increased the
NFIP's borrowing authority by $9.7 billion--from $20.725
billion to its current $30.425 billion level.
H.R. 2246 addresses concerns that the NFIP's fiscal
condition is unsustainable and recognizes that further reforms
are needed to optimize efficiency and instill market
discipline. H.R. 2246 would require the FEMA Administrator to
annually cede a portion of the NFIP's risk to the private
reinsurance or capital markets in an amount determined by the
Administrator that is sufficient to maintain the program's
ability to pay claims, and limit exposure to flood loss. H.R.
2246 would also provide the FEMA Administrator the ability to
enter into multi-year contracts for risk transfers.
Historically, the NFIP had been limited to using flood
insurance premiums, available surplus, borrowing capacity from
the U.S. Treasury, and direct appropriations from Congress to
pay claims. In 2012, the Biggert-Waters Flood Insurance Reform
Act clarified FEMA's authority to secure reinsurance from the
private reinsurance and capital markets. In fact, in January
2017, FEMA, in an attempt to understand the reinsurance market,
acquired approximately $1 billion in reinsurance coverage to
insure against 26 percent of losses between $4 billion and $8
billion. H.R. 2246 provides more clarity and guidance on how
and when FEMA would provide for risk transfers that maximize
FEMA's resources and protect taxpayers from catastrophic
losses. H.R. 2246 would permit several types of risk transfers,
including traditional reinsurance, catastrophe bonds,
collateralized reinsurance, resilience bonds, insurance-linked
securities and other types of risk transfers that may be
created in the future.
In recognition of the inefficiencies of the NFIP in the
commercial and multifamily properties, H.R. 2246 would
eliminate the mandatory purchase requirement for commercial and
multifamily properties, while preserving the eligibility of
such properties to voluntarily purchase NFIP coverage if they
so choose. Today, commercial and multifamily properties,
oftentimes valued many times over the maximum $500,000 NFIP
coverage amount, are forced to purchase both NFIP and excess
coverage. H.R. 2246 would rationalize the flood insurance
market for commercial and multifamily properties by deferring
to the lender to determine whether the loan's collateral will
be required to be covered by flood insurance. This
rationalization would save costs for commercial and multifamily
properties by shedding NFIP regulatory requirements that are
inconsistent with insurance market practices.
H.R. 2246, however, would ensure that commercial and
multifamily properties have access to flood insurance by making
it permissive for these properties to purchase NFIP policies.
As a result, commercial and multifamily properties can opt for
policies that better fit their coverage requirements such as
purchasing umbrella policies for a group of properties.
In recognition of the challenges that plagued the
development of timely flood rate risk maps, H.R. 2246
authorizes alternative community flood maps, developed and
financed by local governments. Today, FEMA is required to
review each community, once every five years, to determine
whether re-mapping is necessary. In some cases, however,
remapping does not occur for over 10 years, thereby leaving the
community subjected to outdated maps. H.R. 2246 would require
the Technical Mapping Advisory Council (TMAC) to develop and
make recommendations to the FEMA Administrator to establish a
set of standards, guidelines, and procedures for State and
local governments to develop alternatives maps to the NFIP's
rate maps.
Subject to certification and approval by the FEMA
Administrator, these community maps would be the flood
insurance rate map for the purposes of the NFIP, with respect
to the area covered on the map. Community maps would be an
avenue for those communities, who desire re-mapping of their
areas on a more frequent basis or elect to use their local
resources to use updated technology, often not available to
FEMA, to produce community maps that provide more detailed data
than provided by the agency.
Hearings
The Committee on Financial Services' Subcommittee on
Housing & Insurance held two hearings examining matters
relating to H.R. 2246 on March 9, 2017 and March 16, 2017. The
Committee on Financial Services held a hearing examining
matters relating to H.R. 2246 on June 7, 2017.
Committee Consideration
The Committee on Financial Services met in open session on
June 21, 2017 to consider H.R. 2246. The Committee ordered H.R.
2246 to be reported favorably to the House, as amended, by a
recorded vote of 36 ayes to 24 nays (Recorded vote no. FC-67),
a quorum being present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. An
amendment offered by Mr. Luetkemeyer was agreed to by voice
vote. The sole recorded vote was on a motion by Chairman
Hensarling to report the bill favorably to the House, as
amended. The motion was agreed to by a recorded vote of 36 ayes
to 24 nays (Recorded vote no. FC-67), a quorum being present.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee states that H.R. 2246
will benefit taxpayers and policyholders by repealing the
mandatory flood insurance coverage requirement for commercial
properties located in flood hazard areas and providing for
greater transfer of risk under the National Flood Insurance
Program to private capital and reinsurance markets.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 24, 2017.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2246, the Taxpayer
Exposure Mitigation Act of 2017.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Robert Reese.
Sincerely,
Mark P. Hadley,
(For Keith Hall, Director).
Enclosure.
H.R. 2246--Taxpayer Exposure Mitigation Act of 2017
Summary: H.R. 2246 would eliminate the requirement for
commercial properties in flood zones to have flood insurance if
the properties are financed by a federally regulated lending
institution, or a federal lender. The bill also would require
the Federal Emergency Management Agency (FEMA) to acquire
coverage for a portion of the National Flood Insurance
Program's (NFIP) potential cost from the private reinsurance or
capital markets annually. Finally, H.R. 2246 would require FEMA
to permit localities to develop and submit their own maps of
local flood risks for FEMA's review and approval for use in
determining NFIP insurance rates.
The cost to enact H.R. 2246 is uncertain and would depend
on the number of commercial properties that drop NFIP coverage.
CBO estimates that enacting H.R. 2246 would increase direct
spending by $325 million over the 2018-2027 period, although
costs could be significantly higher or lower. CBO also
estimates that implementing the bill would cost $40 million
over the 2018-2022 period, assuming appropriation of the
necessary amounts.
Because enacting H.R. 2246 would affect direct spending,
pay-as-you-go procedures apply. Enacting the legislation would
not affect revenues.
CBO estimates that enacting H.R. 2246 would not increase
net direct spending or on-budget deficits by more than $5
billion in any of the four consecutive 10-year periods
beginning in 2028.
H.R. 2246 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would impose no costs on state, local, or tribal
governments.
Estimated cost to the Federal Government: The estimated
budgetary effect of H.R. 2246 is shown in the following table.
The costs of this legislation fall within budget function 450
(community and regional development).
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------------------------------------------------------------------
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2017-2022 2017-2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
INCREASES IN DIRECT SPENDING
Estimated Budget Authority................ 0 5 5 15 30 40 40 45 45 50 50 95 325
Estimated Outlays......................... 0 5 5 15 30 40 40 45 45 50 50 95 325
INCREASES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level............. 0 1 10 10 10 10 10 10 10 10 10 41 91
Estimated Outlays......................... 0 1 9 10 10 10 10 10 10 10 10 40 90
--------------------------------------------------------------------------------------------------------------------------------------------------------
Basis of estimate: For this estimate, CBO assumes that H.R.
2246 will be enacted near the end of fiscal year 2017 and that
the necessary amounts will be appropriated for each fiscal
year.
Background
Under current law, residential and commercial property
owners can choose to buy flood insurance through the NFIP.
Property owners who buy coverage through the NFIP pay annual
premiums which are deposited into the National Flood Insurance
Fund (NFIF) and are used to pay flood damage claims submitted
by policyholders.
Mandatory Purchase Requirement. Owners of properties that
are located within an area designated as having at least a 1
percent chance of being flooded in any year (known as a Special
Flood Hazard Area, or SFHA) and that are financed by a
federally regulated lending institution, government sponsored
enterprise for housing, or federal lender are required to carry
flood insurance. Property owners not receiving financing from
those entities or located outside an SFHA may purchase flood
insurance coverage from a private carrier or the NFIP at their
discretion. The level of compliance with this requirement is
unknown.
Currently, there are about 5 million properties insured by
the NFIP. Of those properties, about 340,000 (or 6.7 percent)
are commercial properties, CBO estimates. How many of those
properties are subject to the mandatory purchase requirement is
unknown because the properties' lending institutions are
required to enforce the requirement and aggregate data on
properties subject to that requirement do not exist.
Premiums. Most properties, about 80 percent, are charged a
premium based on FEMA's estimate of the expected cost to insure
those properties against damages caused by flooding, what CBO
calls actuarial premiums. The remaining 20 percent of NFIP
insured properties are charged premiums that are lower than the
expected cost of flood damage, what CBO calls subsidized
premiums. In 2016, collections from actuarial and subsidized
premiums totaled about $3.5 billion. In 2017, the average NFIP
premium for commercial properties is about $2,400.
Additional Collections. All NFIP policyholders also pay a
Reserve Fund Assessment (RFA) equal to 15 percent of their
premium and a surcharge equal to $25 for policies that cover
primary residences and $250 for policies that cover nonprimary
residences or commercial properties. Both the RFA and surcharge
are deposited into the NFIP Reserve Fund and are available to
pay policyholder claims if amounts in the NFIP are
insufficient. In 2016, a total of $919 million was deposited
into the Reserve Fund. In 2017, the average RFA and surcharge
was about $600 for commercial properties.
Reinsurance. The NFIP is also authorized to purchase
reinsurance from private reinsurance or capital markets.
Reinsurance is a mechanism by which a primary insurer, like the
NFIP, can guard against catastrophic losses by paying a premium
to one or multiple private entities that then assume the
liability to pay certain claims at an agreed upon level of
losses. In 2017, the NFIP purchased about $1 billion of
reinsurance for a single flood with insurable claims between $4
billion and $8 billion. The NFIP paid a premium of $150 million
for that reinsurance and the coverage will last through January
1, 2018.
Direct spending
The bill would eliminate the requirement to buy flood
insurance for commercial properties located in an SFHA and
would require FEMA to purchase reinsurance in the private
market.
Commercial Property. Using a database of NFIP policy
information, CBO estimates that in 2017 there are approximately
230,000 commercial structures in SFHAs with NFIP policies, of
which 40 percent pay subsidized premiums. FEMA does not track
which NFIP insured properties are subject to that mandatory
purchase requirement, but CBO expects the majority (about 75
percent) of those properties have a loan from a federally
regulated lending institution. Thus, CBO estimates that in 2017
approximately 170,000 commercial properties are subject to the
requirement to purchase flood insurance.
In 2014, the Government Accountability Office (GAO)
reported that many property owners do not recognize the
potential damage that may be caused to their property by a
flood and underestimate the risk of a flood to their
property.\1\ While CBO cannot determine how many commercial
properties subject to the mandatory purchase requirement have
NFIP coverage solely because they are required to, we expect
that many such property owners underestimate their flood risk.
Owners of commercial property face NFIP premiums and fees that
average about $3,000 per year. CBO expects that within a few
years about half of the owners of commercial properties
currently subject to the mandatory purchase requirement would
discontinue buying flood insurance under H.R. 2246. CBO is
unaware of any empirical information about the propensity of
individuals to drop mandated insurance requirements when given
the opportunity. However, because many property owners
underestimate the risks they face from flooding, CBO expects
that a significant number of commercial policyholders would
gradually drop coverage if they were not required to have it.
---------------------------------------------------------------------------
\1\See Government Accountability Office, Overview of GAO's Past
Work on the National Flood Insurance Programs (May 2014).
---------------------------------------------------------------------------
Based on an analysis of information provided by FEMA on the
premiums, surcharges, other assessments paid by commercial
property owners, and the expected cost to insure them, CBO
estimates that enacting this provision would increase net
direct spending by $325 million over the 2018-2027 period from
the loss of RFA and surcharge collections from commercial
properties that would have been paying actuarial premiums. That
decrease in collections would be partially offset by fewer
claims resulting from fewer policyholders. Subsidized policy
holders that elected to drop NFIP coverage would reduce net
spending because the expected cost of those policies is greater
than the premiums paid for the coverage.
CBO's estimated costs are uncertain and costs could be
significantly greater or smaller than we have estimated. CBO is
confident that some commercial property policyholders would
drop NFIP coverage under H.R. 2246 at a net cost to the
program. However, without basic information about which
policyholders are required to maintain coverage, this estimate
has a wide range of uncertainty.
Reinsurance. Section 3 of H.R. 2246 would require the NFIP
to transfer a portion of the program's risk to private
reinsurance or capital markets at least once per year in a
manner that would ensure that enough funds are in the NFIP to
cover claims in a typical year. Under current law, FEMA plans
to purchase additional reinsurance for the NFIP after the
expiration of the current coverage in 2018. Because FEMA
intends to continue purchasing reinsurance in future years, CBO
estimates that enacting this provision would have no
significant effect the amount of reinsurance coverage the
agency buys or on NFIP spending.
Spending subject to appropriation
Section 4 of H.R. 2246 would direct FEMA to create
standards and requirements for states and localities that
choose to develop alternative maps to the Flood Insurance Rate
Maps created by FEMA. The section also would require FEMA to
determine within six months of receiving any proposed
alternative maps from states or localities whether to approve
such maps for NFIP rate setting purposes.
Based on an analysis of information provided by FEMA, CBO
estimates that implementing this section would cost $1 million
in 2018 to establish administrative procedures to review and
approve community flood maps and $10 million each year
thereafter to review, analyze, and make a determination on
community flood maps that would be submitted by local
jurisdictions around the country. Such spending would be
subject to appropriation. In 2017, $178 million was
appropriated for FEMA's flood mapping and related activities.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays that are subject to those
pay-as-you-go procedures are shown in the following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 2246, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON JUNE 21, 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------------------------------------------------------------------
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2017-2022 2017-2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN THE DEFICIT
Statutory Pay-As-You-Go Impact............ 0 5 5 15 30 40 40 45 45 50 50 95 325
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in long-term direct spending and deficits: CBO
estimates that enacting H.R. 2246 would not increase net direct
spending or on-budget deficits by more than $5 billion in any
of the four consecutive 10-year periods beginning in 2028.
Intergovernmental and private-sector impact: H.R. 2246
contains no intergovernmental or private-sector mandates as
defined in UMRA and would impose no costs on state, local, or
tribal governments.
Estimate prepared by: Federal costs: Robert Reese; Impact
on state, local, and tribal governments: Rachel Austin; Impact
on the private sector: Logan Smith.
Estimate approved by: H. Samuel Papenfuss, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 2246 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Duplication of Federal Programs
Pursuant to section 3(c)(5) of rule XIII, the Committee
states that no provision of H.R. 2246 establishes or
reauthorizes a program of the Federal Government known to be
duplicative of another Federal program, a program that was
included in any report from the Government Accountability
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most
recent Catalog of Federal Domestic Assistance.
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of H. Res. 5, 115th Cong. (2017),
the Committee states that H.R. 2246 contains no directed
rulemaking.
Section-by-Section Analysis of the Legislation
Sec. 1. Short title
This Act may be cited as the ``Taxpayer Exposure Mitigation
Act of 2017''.
Sec. 2. Opt-out of mandatory coverage requirement for commercial
properties
Amends the Flood Disaster Protection Act of 1973 and the
National Flood Insurance Act of 1968 to eliminate the NFIP's
mandatory purchase requirement for all commercial and
multifamily properties, while preserving the eligibility of
commercial and multifamily properties to voluntarily purchase
NFIP coverage if they so choose. Residential properties
financed by commercial loans would be treated similar to other
commercial and multifamily properties.
Sec. 3. Risk transfer requirement
No later than 18 months after bill enactment, the FEMA
Administrator shall annually cede a portion of the risk of the
NFIP to the private reinsurance or capital markets, as
determined by the Administrator, in an amount that (i) is
sufficient to maintain the ability of the program to pay
claims; and (ii) manages and limits the annual exposure of the
NFIP to flood losses in accordance with the probably maximum
loss target established each such year. The Administrator shall
establish the probable maximum loss target for the NFIP that is
expected to occur such fiscal year. In establishing the
probably maximum loss target, the Administrator shall
consider--(i) the probable maximum loss targets for other U.S.
public natural catastrophe insurance program, including State
wind pools and earthquake programs; (ii) the probably maximum
loss targets of other risk management organization, including
the Federal National Mortgage Association and the Federal Home
Loan Mortgage Corporation; (iii) catastrophic, actuarial, and
other appropriate data modeling results of the NFIP portfolio;
(iv) the availability of funds in the National Flood Insurance
Fund; (v) the availability of funds in the National Flood
Insurance Reserve Fund; (vi) the availability of NFIP borrowing
authority; (vii) the ability of the Administrator to repay
outstanding debt; (viii) amounts appropriated to the
Administrator to carry out the NFIP; (ix) reinsurance, capital
markets, catastrophe bonds, collateralized reinsurance,
resilience bonds, and other insurance-linked securities, and
other risk transfer opportunities; and (x) any other factor the
Administrator determines appropriate.
Gives the Administrator the ability to enter into multi-
year contracts for reinsurance.
Sec. 4. Private or community flood maps
Twelve months after bill enactment, the Technical Mapping
Advisory Council (TMAC) shall develop and make recommendations
to the FEMA Administrator to establish a set of standards,
guidelines, and procedures for state and local governments to
develop alternative maps. Subject to certification and approval
by the Administrator, the map shall be considered the flood
insurance rate map in effect for all purposes of the NFIP, with
respect to the area covered by the map.
Until the Administrator promulgates regulations
implementing this section, the Administrator may adopt policies
and procedures necessary to implement this section without
undergoing notice and comment rulemaking.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
FLOOD DISASTER PROTECTION ACT OF 1973
* * * * * * *
definitions
Sec. 3. (a) As used in this Act, unless the context otherwise
requires, the term--
(1) ``community'' means a State or a political
subdivision thereof which has zoning and building code
jurisdiction over a particular area having special
flood hazards;
(2) ``Federal agency'' means any department, agency,
corporation, or other entity or instrumentality of the
executive branch of the Federal Government, and
includes the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation;
(3) ``financial assistance'' means any form of loan,
grant, guaranty, insurance, payment, rebate, subsidy,
disaster assistance loan or grant, or any other form of
direct or indirect Federal assistance, other than
general or special revenue sharing or formula grants
made to States;
(4) ``financial assistance for acquisition or
construction purposes'' means any form of financial
assistance which is intended in whole or in part for
the acquisition, construction, reconstruction, repair,
or improvement of any publicly or privately owned
building or mobile home, and for any machinery,
equipment fixtures, and furnishings contained or to be
contained therein, and shall include the purchase or
subsidization of mortgages or mortgage loans but shall
exclude assistance pursuant to the Disaster Relief and
Emergency Assistance Act (other than assistance under
such Act in connection with a flood);
(5) ``Federal entity for lending regulation'' means
the Board of Governors of the Federal Reserve System,
the Federal Deposit Insurance Corporation, the
Comptroller of the Currency, the National Credit Union
Administration, and the Farm Credit Administration, and
with respect to a particular regulated lending
institution means the entity primarily responsible for
the supervision of the institution;
(6) ``Administrator'' means the Administrator of the
Federal Emergency Management Agency;
(7) ``Federal agency lender'' means a Federal agency
that makes direct loans secured by improved real estate
or a mobile home, to the extent such agency acts in
such capacity;
(8) the term ``improved real estate'' means real
estate upon which a building is located;
(9) ``lender'' means a regulated lending institution
or Federal agency lender;
(10) ``regulated lending institution'' means any
bank, savings and loan association, credit union, farm
credit bank, Federal land bank association, production
credit association, or similar institution subject to
the supervision of a Federal entity for lending
regulation; [and]
(11) ``servicer'' means the person responsible for
receiving any scheduled periodic payments from a
borrower pursuant to the terms of a loan, including
amounts for taxes, insurance premiums, and other
charges with respect to the property securing the loan,
and making the payments of principal and interest and
such other payments with respect to the amounts
received from the borrower as may be required pursuant
to the terms of the loan[.]; and
(12) ``residential improved real estate'' means
improved real estate that--
(A) is primarily used for residential
purposes, as defined by the Federal entities
for lending regulation; and
(B) secures financing or financial assistance
provided through a federally related single
family loan progam, as defined by the Federal
entities for lending regulation.
(b) The Administrator is authorized to define or redefine, by
rules and regulations, any scientific or technical term used in
this Act, insofar as such definition is not inconsistent with
the purposes of this Act.
TITLE I--EXPANSION OF NATIONAL FLOOD INSURANCE PROGRAM
* * * * * * *
flood insurance purchase and compliance requirements and escrow
accounts
Sec. 102. (a) After the expiration of sixty days following
the date of enactment of this Act, no Federal officer or agency
shall approve any financial assistance for acquisition or
construction purposes for use in any area that has been
identified by the Administrator as an area having special flood
hazards and in which the sale of flood insurance has been made
available under the National Flood Insurance Act of 1968,
unless the building or mobile home and any personal property to
which such financial assistance relates is covered by flood
insurance in an amount at least equal to its development or
project cost (less estimated land cost) or to the maximum limit
of coverage made available with respect to the particular type
of property under the National Flood Insurance Act of 1968,
whichever is less: Provided, That if the financial assistance
provided is in the form of a loan or an insurance or guaranty
of a loan, the amount of flood insurance required need not
exceed the outstanding principal balance of the loan and need
not be required beyond the term of the loan. The requirement of
maintaining flood insurance shall apply during the life of the
property, regardless of transfer of ownership of such property.
(b) Requirement for Mortgage Loans.--
(1) Regulated lending institutions.--Each Federal
entity for lending regulation (after consultation and
coordination with the Financial Institutions
Examination Council established under the Federal
Financial Institutions Examination Council Act of 1974)
shall by regulation direct regulated lending
institutions--
(A) not to make, increase, extend, or renew
any loan secured by residential improved real
estate or a mobile home located or to be
located in an area that has been identified by
the Administrator as an area having special
flood hazards and in which flood insurance has
been made available under the National Flood
Insurance Act of 1968, unless the residential
building or mobile home and any personal
property securing such loan is covered for the
term of the loan by flood insurance in an
amount at least equal to the outstanding
principal balance of the loan or the maximum
limit of coverage made available under the Act
with respect to the particular type of
property, whichever is less; and
(B) to accept private flood insurance as
satisfaction of the flood insurance coverage
requirement under subparagraph (A) if the
coverage provided by such private flood
insurance meets the requirements for coverage
under such subparagraph.
(2) Federal agency lenders.--A Federal agency lender
may not make, increase, extend, or renew any loan
secured by residential improved real estate or a mobile
home located or to be located in an area that has been
identified by the Administrator as an area having
special flood hazards and in which flood insurance has
been made available under the National Flood Insurance
Act of 1968, unless the residential building or mobile
home and any personal property securing such loan is
covered for the term of the loan by flood insurance in
the amount provided in paragraph (1)(A). Each Federal
agency lender shall accept private flood insurance as
satisfaction of the flood insurance coverage
requirement under the preceding sentence if the flood
insurance coverage provided by such private flood
insurance meets the requirements for coverage under
such sentence. Each Federal agency lender shall issue
any regulations necessary to carry out this paragraph.
Such regulations shall be consistent with and
substantially identical to the regulations issued under
paragraph (1)(A).
(3) Government-sponsored enterprises for housing.--
The Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation shall implement
procedures reasonably designed to ensure that, for any
loan that is--
(A) secured by residential improved real
estate or a mobile home located in an area that
has been identified, at the time of the
origination of the loan or at any time during
the term of the loan, by the Administrator as
an area having special flood hazards and in
which flood insurance is available under the
National Flood Insurance Act of 1968, and
(B) purchased by such entity,
the residential building or mobile home and any
personal property securing the loan is covered for the
term of the loan by flood insurance in the amount
provided in paragraph (1)(A). The Federal National
Mortgage Association and the Federal Home Loan Mortgage
Corporation shall accept private flood insurance as
satisfaction of the flood insurance coverage
requirement under paragraph (1)(A) if the flood
insurance coverage provided by such private flood
insurance meets the requirements for coverage under
such paragraph and any requirements established by the
Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation, respectively, relating
to the financial solvency, strength, or claims-paying
ability of private insurance companies from which the
Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation will accept private
flood insurance.
(4) Applicability.--
(A) Existing coverage.--Except as provided in
subparagraph (B), paragraph (1) shall apply on
the date of enactment of the Riegle Community
Development and Regulatory Improvement Act of
1994.
(B) New coverage.--Paragraphs (2) and (3)
shall apply only with respect to any loan made,
increased, extended, or renewed after the
expiration of the 1-year period beginning on
the date of enactment of the Riegle Community
Development and Regulatory Improvement Act of
1994. Paragraph (1) shall apply with respect to
any loan made, increased, extended, or renewed
by any lender supervised by the Farm Credit
Administration only after the expiration of the
period under this subparagraph.
(C) Continued effect of regulations.--
Notwithstanding any other provision of this
subsection, the regulations to carry out
paragraph (1), as in effect immediately before
the date of enactment of the Riegle Community
Development and Regulatory Improvement Act of
1994, shall continue to apply until the
regulations issued to carry out paragraph (1)
as amended by section 522(a) of such Act take
effect.
(5) Rule of construction.--Nothing in this subsection
shall be construed to supersede or limit the authority
of a Federal entity for lending regulation, the Federal
Housing Finance Agency, a Federal agency lender, the
Federal National Mortgage Association, or the Federal
Home Loan Mortgage Corporation to establish
requirements relating to the financial solvency,
strength, or claims-paying ability of private insurance
companies from which the entity or agency will accept
private flood insurance.
(6) Notice.--
(A) In general.--Each lender shall disclose
to a borrower that is subject to this
subsection that--
(i) flood insurance is available from
private insurance companies that issue
standard flood insurance policies on
behalf of the national flood insurance
program or directly from the national
flood insurance program;
(ii) flood insurance that provides
the same level of coverage as a
standard flood insurance policy under
the national flood insurance program
may be available from a private
insurance company that issues policies
on behalf of the company; and
(iii) the borrower is encouraged to
compare the flood insurance coverage,
deductibles, exclusions, conditions and
premiums associated with flood
insurance policies issued on behalf of
the national flood insurance program
and policies issued on behalf of
private insurance companies and to
direct inquiries regarding the
availability, cost, and comparisons of
flood insurance coverage to an
insurance agent.
(B) Rule of construction.--Nothing in this
paragraph shall be construed as affecting or
otherwise limiting the authority of a Federal
entity for lending regulation to approve any
disclosure made by a regulated lending
institution for purposes of complying with
subparagraph (A).
(7) Private flood insurance defined.--In this
subsection, the term ``private flood insurance'' means
an insurance policy that--
(A) is issued by an insurance company that
is--
(i) licensed, admitted, or otherwise
approved to engage in the business of
insurance in the State or jurisdiction
in which the insured building is
located, by the insurance regulator of
that State or jurisdiction; or
(ii) in the case of a policy of
difference in conditions, multiple
peril, all risk, or other blanket
coverage insuring nonresidential
commercial property, is recognized, or
not disapproved, as a surplus lines
insurer by the insurance regulator of
the State or jurisdiction where the
property to be insured is located;
(B) provides flood insurance coverage which
is at least as broad as the coverage provided
under a standard flood insurance policy under
the national flood insurance program, including
when considering deductibles, exclusions, and
conditions offered by the insurer;
(C) includes--
(i) a requirement for the insurer to
give 45 days' written notice of
cancellation or non-renewal of flood
insurance coverage to--
(I) the insured; and
(II) the regulated lending
institution or Federal agency
lender;
(ii) information about the
availability of flood insurance
coverage under the national flood
insurance program;
(iii) a mortgage interest clause
similar to the clause contained in a
standard flood insurance policy under
the national flood insurance program;
and
(iv) a provision requiring an insured
to file suit not later than 1 year
after date of a written denial of all
or part of a claim under the policy;
and
(D) contains cancellation provisions that are
as restrictive as the provisions contained in a
standard flood insurance policy under the
national flood insurance program.
(c) Exceptions to Purchase Requirements.--
(1) State-owned property.--Notwithstanding the other
provisions of this section, flood insurance shall not
be required on any State-owned property that is covered
under an adequate State policy of self-insurance
satisfactory to the Administrator. The Administrator
shall publish and periodically revise the list of
States to which this subsection applies.
(2) Small loans.--Notwithstanding any other provision
of this section, subsections (a) and (b) shall not
apply to any loan having--
(A) an original outstanding principal balance
of $5,000 or less; and
(B) a repayment term of 1 year or less.
(3) Detached structures.--Notwithstanding any other
provision of this section, flood insurance shall not be
required[, in the case of any residential property, for
any structure that is a part of such property] for any
structure that is part of a residential property but is
detached from the primary residential structure of such
property and does not serve as a residence.
(d) Escrow of Flood Insurance Payments.--
(1) Regulated lending institutions.--
(A) Federal entities responsible for lending
regulations.--Each Federal entity for lending
regulation (after consultation and coordination
with the Federal Financial Institutions
Examination Council) shall, by regulation,
direct that all premiums and fees for flood
insurance under the National Flood Insurance
Act of 1968, for residential improved real
estate or a mobile home, shall be paid to the
regulated lending institution or servicer for
any loan secured by the residential improved
real estate or mobile home, with the same
frequency as payments on the loan are made, for
the duration of the loan. Except as provided in
subparagraph (B), upon receipt of any premiums
or fees, the regulated lending institution or
servicer shall deposit such premiums and fees
in an escrow account on behalf of the borrower.
Upon receipt of a notice from the Administrator
or the provider of the flood insurance that
insurance premiums are due, the premiums
deposited in the escrow account shall be paid
to the provider of the flood insurance.
(B) Limitation.--Except as may be required
under applicable State law, a Federal entity
for lending regulation may not direct or
require a regulated lending institution to
deposit premiums or fees for flood insurance
under the National Flood Insurance Act of 1968
in an escrow account on behalf of a borrower
under subparagraph (A)--
(i) if--
(I) the regulated lending
institution has total assets of
less than $1,000,000,000; and
(II) on or before the date of
enactment of the Biggert-Waters
Flood Insurance Reform Act of
2012, the regulated lending
institution--
(aa) in the case of a
loan secured by
residential improved
real estate or a mobile
home, was not required
under Federal or State
law to deposit taxes,
insurance premiums,
fees, or any other
charges in an escrow
account for the entire
term of the loan; and
(bb) did not have a
policy of consistently
and uniformly requiring
the deposit of taxes,
insurance premiums,
fees, or any other
charges in an escrow
account for loans
secured by residential
improved real estate or
a mobile home; or
(ii) in the case of a loan that--
(I) is in a junior or
subordinate position to a
senior lien secured by the same
residential improved real
estate or mobile home for which
flood insurance is being
provided at the time of the
origination of the loan;
(II) is secured by
residential improved real
estate or a mobile home that is
part of a condominium,
cooperative, or other project
development, if the residential
improved real estate or mobile
home is covered by a flood
insurance policy that--
(aa) meets the
requirements that the
regulated lending
institution is required
to enforce under
subsection (b)(1);
(bb) is provided by
the condominium
association,
cooperative, homeowners
association, or other
applicable group; and
(cc) the premium for
which is paid by the
condominium
association,
cooperative, homeowners
association, or other
applicable group as a
common expense;
(III) is secured by
residential improved real
estate or a mobile home that is
used as collateral for a
business purpose;
(IV) is a home equity line of
credit;
(V) is a nonperforming loan;
or
(VI) has a term of not longer
than 12 months.
(2) Federal agency lenders.--Each Federal agency
lender shall by regulation require and provide for
escrow and payment of any flood insurance premiums and
fees relating to residential improved real estate and
mobile homes securing loans made by the Federal agency
lender under the circumstances and in the manner
provided under paragraph (1). Any regulations issued
under this paragraph shall be consistent with and
substantially identical to the regulations issued under
paragraph (1).
(3) Applicability of respa.--Escrow accounts
established pursuant to this subsection shall be
subject to the provisions of section 10 of the Real
Estate Settlement Procedures Act of 1974.
(4) Definition.--For purposes of this subsection, the
term ``residential improved real estate'' means
improved real estate for which the improvement is a
residential building.
(5) Applicability.--This subsection shall apply only
with respect to any loan made, increased, extended, or
renewed after the expiration of the 1-year period
beginning on the date of enactment of the Riegle
Community Development and Regulatory Improvement Act of
1994.
(e) Placement of Flood Insurance by Lender.--
(1) Notification to borrower of lack of coverage.--
If, at the time of origination or at any time during
the term of a loan secured by residential improved real
estate or by a mobile home located in an area that has
been identified by the Administrator (at the time of
the origination of the loan or at any time during the
term of the loan) as an area having special flood
hazards and in which flood insurance is available under
the National Flood Insurance Act of 1968, the lender or
servicer for the loan determines that the residential
building or mobile home and any personal property
securing the loan is not covered by flood insurance or
is covered by such insurance in an amount less than the
amount required for the property pursuant to paragraph
(1), (2), or (3) of subsection (b), the lender or
servicer shall notify the borrower under the loan that
the borrower should obtain, at the borrower's expense,
an amount of flood insurance for the residential
building or mobile home and such personal property that
is not less than the amount under subsection (b)(1),
for the term of the loan.
(2) Purchase of coverage on behalf of borrower.--If
the borrower fails to purchase such flood insurance
within 45 days after notification under paragraph (1),
the lender or servicer for the loan shall purchase the
insurance on behalf of the borrower and may charge the
borrower for the cost of premiums and fees incurred by
the lender or servicer for the loan in purchasing the
insurance, including premiums or fees incurred for
coverage beginning on the date on which flood insurance
coverage lapsed or did not provide a sufficient
coverage amount.
(3) Termination of force-placed insurance.--Within 30
days of receipt by the lender or servicer of a
confirmation of a borrower's existing flood insurance
coverage, the lender or servicer shall--
(A) terminate any insurance purchased by the
lender or servicer under paragraph (2); and
(B) refund to the borrower all premiums paid
by the borrower for any insurance purchased by
the lender or servicer under paragraph (2)
during any period during which the borrower's
flood insurance coverage and the insurance
coverage purchased by the lender or servicer
were each in effect, and any related fees
charged to the borrower with respect to the
insurance purchased by the lender or servicer
during such period.
(4) Sufficiency of demonstration.--For purposes of
confirming a borrower's existing flood insurance
coverage, a lender or servicer for a loan shall accept
from the borrower an insurance policy declarations page
that includes the existing flood insurance policy
number and the identity of, and contact information
for, the insurance company or agent.
(5) Review of determination regarding required
purchase.--
(A) In general.--The borrower and lender for
a loan secured by residential improved real
estate or a mobile home may jointly request the
Administrator to review a determination of
whether the residential building or mobile home
is located in an area having special flood
hazards. Such request shall be supported by
technical information relating to the
residential improved real estate or mobile
home. Not later than 45 days after the
Administrator receives the request, the
Administrator shall review the determination
and provide to the borrower and the lender with
a letter stating whether or not the residential
building or mobile home is in an area having
special flood hazards. The determination of the
Administrator shall be final.
(B) Effect of determination.--Any person to
whom a borrower provides a letter issued by the
Administrator pursuant to subparagraph (A),
stating that the residential building or mobile
home securing the loan of the borrower is not
in an area having special flood hazards, shall
have no obligation under this title to require
the purchase of flood insurance for such
residential building or mobile home during the
period determined by the Administrator which
shall be specified in the letter and shall
begin on the date on which such letter is
provided.
(C) Effect of failure to respond.--If a
request under subparagraph (A) is made in
connection with the origination of a loan and
the Administrator fails to provide a letter
under subparagraph (A) before the later of (i)
the expiration of the 45-day period under such
subparagraph, or (ii) the closing of the loan,
no person shall have an obligation under this
title to require the purchase of flood
insurance for the residential building or
mobile home securing the loan until such letter
is provided.
(6) Applicability.--This subsection shall apply to
all loans outstanding on or after the date of enactment
of the Riegle Community Development and Regulatory
Improvement Act of 1994.
(f) Civil Monetary Penalties for Failure To Require Flood
Insurance or Notify.--
(1) Civil monetary penalties against regulated
lenders.--Any regulated lending institution that is
found to have a pattern or practice of committing
violations under paragraph (2) shall be assessed a
civil penalty by the appropriate Federal entity for
lending regulation in the amount provided under
paragraph (5).
(2) Lender violations.--The violations referred to in
paragraph (1) shall include--
(A) making, increasing, extending, or
renewing loans in violation of--
(i) the regulations issued pursuant
to subsection (b) of this section;
(ii) the escrow requirements under
subsection (d) of this section; or
(iii) the notice requirements under
section 1364 of the National Flood
Insurance Act of 1968; or
(B) failure to provide notice or purchase
flood insurance coverage in violation of
subsection (e) of this section.
(3) Civil monetary penalties against gse's.--
(A) In general.--If the Federal National
Mortgage Association or the Federal Home Loan
Mortgage Corporation is found by the Director
of the Federal Housing Finance Agency to have a
pattern or practice of purchasing loans in
violation of the procedures established
pursuant to subsection (b)(3), the Director of
such Office shall assess a civil penalty
against such enterprise in the amount provided
under paragraph (5) of this subsection.
(B) Definition.--For purposes of this
subsection, the term ``enterprise'' means the
Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation.
(4) Notice and hearing.--A penalty under this
subsection may be issued only after notice and an
opportunity for a hearing on the record.
(5) Amount.--A civil monetary penalty under this
subsection may not exceed $2,000 for each violation
under paragraph (2) or paragraph (3).
(6) Lender compliance.--Notwithstanding any State or
local law, for purposes of this subsection, any
regulated lending institution that purchases flood
insurance or renews a contract for flood insurance on
behalf of or as an agent of a borrower of a loan for
which flood insurance is required shall be considered
to have complied with the regulations issued under
subsection (b).
(7) Effect of transfer on liability.--Any sale or
other transfer of a loan by a regulated lending
institution that has committed a violation under
paragraph (1), that occurs subsequent to the violation,
shall not affect the liability of the transferring
lender with respect to any penalty under this
subsection. A lender shall not be liable for any
violations relating to a loan committed by another
regulated lending institution that previously held the
loan.
(8) Deposit of penalties.--Any penalties collected
under this subsection shall be paid into the National
Flood Mitigation Fund under section 1367 of the
National Flood Insurance Act of 1968.
(9) Additional penalties.--Any penalty under this
subsection shall be in addition to any civil remedy or
criminal penalty otherwise available.
(10) Statute of limitations.--No penalty may be
imposed under this subsection after the expiration of
the 4-year period beginning on the date of the
occurrence of the violation for which the penalty is
authorized under this subsection.
(g) Other Actions To Remedy Pattern of Noncompliance.--
(1) Authority of federal entities for lending
regulation.--A Federal entity for lending regulation
may require a regulated lending institution to take
such remedial actions as are necessary to ensure that
the regulated lending institution complies with the
requirements of the national flood insurance program if
the Federal agency for lending regulation makes a
determination under paragraph (2) regarding the
regulated lending institution.
(2) Determination of violations.--A determination
under this paragraph shall be a finding that--
(A) the regulated lending institution has
engaged in a pattern and practice of
noncompliance in violation of the regulations
issued pursuant to subsection (b), (d), or (e)
or the notice requirements under section 1364
of the National Flood Insurance Act of 1968;
and
(B) the regulated lending institution has not
demonstrated measurable improvement in
compliance despite the assessment of civil
monetary penalties under subsection (f).
(h) Fee for Determining Location.--Notwithstanding any other
Federal or State law, any person who makes a loan secured by
residential improved real estate or a mobile home or any
servicer for such a loan may charge a reasonable fee for the
costs of determining whether the residential building or mobile
home securing the loan is located in an area having special
flood hazards, but only in accordance with the following
requirements:
(1) Borrower fee.--The borrower under such a loan may
be charged the fee, but only if the determination--
(A) is made pursuant to the making,
increasing, extending, or renewing of the loan
that is initiated by the borrower;
(B) is made pursuant to a revision or
updating under section 1360(f) of the
floodplain areas and flood-risk zones or
publication of a notice or compendia under
subsection (h) or (i) of section 1360 that
affects the area in which the residential
improved real estate or mobile home securing
the loan is located or that, in the
determination of the Administrator, may
reasonably be considered to require a
determination under this subsection; or
(C) results in the purchase of flood
insurance coverage pursuant to the requirement
under subsection (e)(2).
(2) Purchaser or transferee fee.--The purchaser or
transferee of such a loan may be charged the fee in the
case of sale or transfer of the loan.
* * * * * * *
----------
NATIONAL FLOOD INSURANCE ACT OF 1968
* * * * * * *
TITLE XIII--NATIONAL FLOOD INSURANCE
* * * * * * *
CHAPTER II--ORGANIZATION AND ADMINISTRATION OF THE FLOOD INSURANCE
PROGRAM
* * * * * * *
Part C--Provisions of General Applicability
services by insurance industry
Sec. 1345. (a) In administering the flood insurance program
under this chapter, the Administrator is authorized to enter
into any contracts, agreements, or other appropriate
arrangements which may, from time to time, be necessary for the
purpose of utilizing, on such terms and conditions as may be
agreed upon, the facilities and services of any insurance
companies or other insurers, insurance agents and brokers, or
insurance adjustment organizations; and such contracts,
agreements, or arrangements may include provision for payment
of applicable operating costs and allowances for such
facilities and services as set forth in the schedules
prescribed under section 1311.
(b) Any such contracts, agreements, or other arrangements may
be entered into without regard to the provisions of section
3709 of the Revised Statutes (41 U.S.C. 5) or any other
provisions of law requiring competitive bidding and without
regard to the provisions of the Federal Advisory Committee Act
(5 U.S.C. App.).
(c) The Administrator of the Federal Emergency Management
Agency shall hold any agent or broker selling or undertaking to
sell flood insurance under this title harmless from any
judgment for damages against such agent or broker as a result
of any court action by a policyholder or applicant arising out
of an error or omission on the part of the Federal Emergency
Management Agency, and shall provide any such agent or broker
with indemnification, including court costs and reasonable
attorney fees, arising out of and caused by an error or
omission on the part of the Federal Emergency Management Agency
and its contractors. The Administrator of the Federal Emergency
Management Agency may not hold harmless or indemnify an agent
or broker for his or her error or omission.
(d) FEMA Authority on Transfer of Policies.--Notwithstanding
any other provision of this title, the Administrator may, at
the discretion of the Administrator, refuse to accept the
transfer of the administration of policies for coverage under
the flood insurance program under this title that are written
and administered by any insurance company or other insurer, or
any insurance agent or broker.
(e) Risk Transfer.--
(1) Authority.--The Administrator may secure
reinsurance of coverage provided by the flood insurance
program from the private reinsurance and capital
markets at rates and on terms determined by the
Administrator to be reasonable and appropriate, in an
amount sufficient to maintain the ability of the
program to pay claims.
(2) Required risk transfer coverage.--
(A) Requirement.--Not later than the
expiration of the 18-month period beginning
upon the date of the enactment of this
paragraph and at all times thereafter, the
Administrator shall annually cede a portion of
the risk of the flood insurance program under
this title to the private reinsurance or
capital markets, or any combination thereof,
and at rates and terms that the Administrator
determines to be reasonable and appropriate, in
an amount that--
(i) is sufficient to maintain the
ability of the program to pay claims;
and
(ii) manages and limits the annual
exposure of the flood insurance program
to flood losses in accordance with the
probable maximum loss target
established for such year under
subparagraph (B).
(B) Probable maximum loss target.--The
Administrator shall for each fiscal year,
establish a probable maximum loss target for
the national flood insurance program that shall
be the maximum probable loss under the national
flood insurance program that is expected to
occur in such fiscal year.
(C) Considerations.--In establishing the
probable maximum loss target under subparagraph
(B) for each fiscal year and carrying out
subparagraph (A), the Administrator shall
consider--
(i) the probable maximum loss targets
for other United States public natural
catastrophe insurance programs,
including as State wind pools and
earthquake programs;
(ii) the probable maximum loss
targets of other risk management
organizations, including the Federal
National Mortgage Association and the
Federal Home Loan Mortgage Corporation;
(iii) catastrophic, actuarial, and
other appropriate data modeling results
of the national flood insurance program
portfolio;
(iv) the availability of funds in the
National Flood Insurance Fund
established under section 1310 (42
U.S.C. 4017);
(v) the availability of funds in the
National Flood Insurance Reserve Fund
established under section 1310A (42
U.S.C. 4017a);
(vi) the availability of borrowing
authority under section 1309 (42 U.S.C.
4016);
(vii) the ability of the
Administrator to repay outstanding
debt;
(viii) amounts appropriated to the
Administrator to carry out the national
flood insurance program;
(ix) reinsurance, capital markets,
catastrophe bonds, collateralized
reinsurance, resilience bonds, and
other insurance-linked securities, and
other risk transfer opportunities; and
(x) any other factor the
Administrator determines appropriate.
(D) Multi-year contracts.--Nothing in this
paragraph may be construed to prevent or
prohibit the Administrator from complying with
the requirement under subparagraph (A)
regarding ceding risk through contracts having
a duration longer than one year.
* * * * * * *
CHAPTER III--COORDINATION OF FLOOD INSURANCE WITH LAND-MANAGEMENT
PROGRAMS IN FLOOD-PRONE AREAS
identification of flood-prone areas
Sec. 1360. (a) The Administrator [is authorized to consult]
is authorized--
(1) to consult with, receive information from, and
enter into any agreements or other arrangements with
the Secretaries of the Army, the Interior, Agriculture,
and Commerce, the Tennessee Valley Authority, and the
heads of other Federal departments or agencies, on a
reimbursement basis, or with the head of any State or
local agency, or enter into contracts with any persons
or private firms, in order that he may--
[(1)] (A) identify and publish information
with respect to all flood plain areas,
including coastal areas located in the United
States, which have special flood hazards,
within five years following the date of the
enactment of this Act, and
[(2)] (B) establish or update flood-risk zone
data in all such areas, and make estimates with
respect to the rates of probable flood caused
loss for the various flood risk zones for each
of these areas until the date specified in
section 1319[.]; and
(2) to receive proposed alternative maps from
communities developed pursuant to standards and
requirements recommended by the Technical Mapping
Advisory Council, as required by section 100215(m) of
the Biggert-Waters Flood Insurance Reform Act of 2012
(42 U.S.C. 4101a(m)) and adopted by the Administrator
as required by section 100216(c)(3) of such Act (42
U.S.C. 4101b(c)(3)), so that the Administrator may--
(A) publish information with respect to all
flood plain areas, including coastal areas
located in the United States, which have
special flood hazards, and
(B) establish or update flood-risk zone data
in all such areas, and make estimates with
respect to the rates of probable flood caused
loss for the various flood risk zones for each
of these areas until the date specified in
section 1319.
(b) The Administrator is directed to accelerate the
identification of risk zones within flood-prone and mudslide-
prone areas, as provided by subsection (a)(2) of this section,
in order to make known the degree of hazard within each such
zone at the earliest possible date. To accomplish this
objective, the Administrator is authorized, without regard to
subsections (a) and (b) of section 3324 of title 31, United
States Code, and section 3709 of the Revised Statutes (41
U.S.C. 5), to make grants, provide technical assistance, and
enter into contracts, cooperative agreements, or other
transactions, on such terms as he may deem appropriate, or
consent to modifications thereof, and to make advance or
progress payments in connection therewith.
(c) The Secretary of Defense (through the Army Corps of
Engineers), the Secretary of the Interior (through the United
States Geological Survey), the Secretary of Agriculture
(through the Soil Conservation Service), the Secretary of
Commerce (through the National Oceanic and Atmospheric
Administration), the head of the Tennessee Valley Authority,
and the heads of all other Federal agencies engaged in the
identification or delineation of flood-risk zones within the
several States shall, in consultation with the Administrator,
give the highest practicable priority in the allocation of
available manpower and other available resources to the
identification and mapping of flood hazard areas and flood-risk
zones, in order to assist the Administrator to meet the
deadline established by this section.
(d) The Administrator shall, not later than September 30,
1984, submit to the Congress a plan for bringing all
communities containing flood-risk zones into full program
status by September 30, 1987.
(e) Review of Flood Maps.--Once during each 5-year period
(the 1st such period beginning on the date of enactment of the
Riegle Community Development and Regulatory Improvement Act of
1994) or more often as the Administrator determines necessary,
the Administrator shall assess the need to revise and update
all floodplain areas and flood risk zones identified,
delineated, or established under this section, based on an
analysis of all natural hazards affecting flood risks.
(f) Updating Flood Maps.--The Administrator shall revise and
update any floodplain areas and flood-risk zones--
(1) upon the determination of the Administrator,
according to the assessment under subsection (e), that
revision and updating are necessary for the areas and
zones; or
(2) upon the request from any State or local
government stating that specific floodplain areas or
flood-risk zones in the State or locality need revision
or updating, if sufficient technical data justifying
the request is submitted and the unit of government
making the request agrees to provide funds in an amount
determined by the Administrator.
(g) Availability of Flood Maps.--To promote compliance with
the requirements of this title, the Administrator shall make
flood insurance rate maps and related information available
free of charge to the Federal entities for lending regulation,
Federal agency lenders, State agencies directly responsible for
coordinating the national flood insurance program, and
appropriate representatives of communities participating in the
national flood insurance program, and at a reasonable cost to
all other persons. Any receipts resulting from this subsection
shall be deposited in the National Flood Insurance Fund,
pursuant to section 1310(b)(6).
(h) Notification of Flood Map Changes.--The Administrator
shall cause notice to be published in the Federal Register (or
shall provide notice by another comparable method) of any
change to flood insurance map panels and any change to flood
insurance map panels issued in the form of a letter of map
amendment or a letter of map revision. Such notice shall be
published or otherwise provided not later than 30 days after
the map change or revision becomes effective. Notice by any
method other than publication in the Federal Register shall
include all pertinent information, provide for regular and
frequent distribution, and be at least as accessible to map
users as notice in the Federal Register. All notices under this
subsection shall include information on how to obtain copies of
the changes or revisions.
(i) Compendia of Flood Map Changes.--Every 6 months, the
Administrator shall publish separately in their entirety within
a compendium, all changes and revisions to flood insurance map
panels and all letters of map amendment and letters of map
revision for which notice was published in the Federal Register
or otherwise provided during the preceding 6 months. The
Administrator shall make such compendia available, free of
charge, to Federal entities for lending regulation, Federal
agency lenders, and States and communities participating in the
national flood insurance program pursuant to section 1310 and
at cost to all other parties. Any receipts resulting from this
subsection shall be deposited in the National Flood Insurance
Fund, pursuant to section 1310(b)(6).
(j) Provision of Information.--In the implementation of
revisions to and updates of flood insurance rate maps, the
Administrator shall share information, to the extent
appropriate, with the Under Secretary of Commerce for Oceans
and Atmosphere and representatives from State coastal zone
management programs.
* * * * * * *
notice requirements
Sec. 1364. (a) Notification of Special Flood Hazards.--
(1) Regulated lending institutions.--Each Federal
entity for lending regulation (after consultation and
coordination with the Financial Institutions
Examination Council) shall by regulation require
regulated lending institutions, as a condition of
making, increasing, extending, or renewing any loan
secured by residential improved real estate or a mobile
home that the regulated lending institution determines
is located or is to be located in an area that has been
identified by the Administrator under this title or the
Flood Disaster Protection Act of 1973 as an area having
special flood hazards, to notify the purchaser or
lessee (or obtain satisfactory assurances that the
seller or lessor has notified the purchaser or lessee)
and the servicer of the loan of such special flood
hazards, in writing, a reasonable period in advance of
the signing of the purchase agreement, lease, or other
documents involved in the transaction. The regulations
shall also require that the regulated lending
institution retain a record of the receipt of the
notices by the purchaser or lessee and the servicer.
(2) Federal agency lenders.--Each Federal agency
lender shall by regulation require notification in the
manner provided under paragraph (1) with respect to any
loan that is made by the Federal agency lender and
secured by residential improved real estate or a mobile
home located or to be located in an area that has been
identified by the Administrator under this title or the
Flood Disaster Protection Act of 1973 as an area having
special flood hazards. Any regulations issued under
this paragraph shall be consistent with and
substantially identical to the regulations issued under
paragraph (1).
(3) Contents of notice.--Written notification
required under this subsection shall include--
(A) a warning, in a form to be established by
the Administrator, stating that the residential
building on the improved real estate securing
the loan is located, or the mobile home
securing the loan is or is to be located, in an
area having special flood hazards;
(B) a description of the flood insurance
purchase requirements under section 102(b) of
the Flood Disaster Protection Act of 1973;
(C) a statement that flood insurance coverage
may be purchased under the national flood
insurance program and is also available from
private insurers, as required under section
102(b)(6) of the Flood Disaster Protection Act
of 1973 (42 U.S.C. 4012a(b)(6)); and
(D) any other information that the
Administrator considers necessary to carry out
the purposes of the national flood insurance
program.
(b) Notification of Change of Servicer.--
(1) Lending institutions.--Each Federal entity for
lending regulation (after consultation and coordination
with the Financial Institutions Examination Council)
shall by regulation require regulated lending
institutions, in connection with the making,
increasing, extending, renewing, selling, or
transferring any loan described in subsection (a)(1),
to notify the Administrator (or the designee of the
Administrator) in writing during the term of the loan
of the servicer of the loan. Such institutions shall
also notify the Administrator (or such designee) of any
change in the servicer of the loan, not later than 60
days after the effective date of such change. The
regulations under this subsection shall provide that
upon any change in the servicing of a loan, the duty to
provide notification under this subsection shall
transfer to the transferee servicer of the loan.
(2) Federal agency lenders.--Each Federal agency
lender shall by regulation provide for notification in
the manner provided under paragraph (1) with respect to
any loan described in subsection (a)(1) that is made by
the Federal agency lender. Any regulations issued under
this paragraph shall be consistent with and
substantially identical to the regulations issued under
paragraph (1) of this subsection.
(c) Notification of Expiration of Insurance.--The
Administrator (or the designee of the Administrator) shall, not
less than 45 days before the expiration of any contract for
flood insurance under this title, issue notice of such
expiration by first class mail to the owner of the property
covered by the contract, the servicer of any loan secured by
the property covered by the contract, and (if known to the
Administrator) the owner of the loan.
standard hazard determination forms
Sec. 1365. (a) Development.--The Administrator, in
consultation with representatives of the mortgage and lending
industry, the Federal entities for lending regulation, the
Federal agency lenders, and any other appropriate individuals,
shall develop a standard form for determining, in the case of a
loan secured by residential improved real estate or a mobile
home, whether the residential building or mobile home is
located in an area identified by the Administrator as an area
having special flood hazards and in which flood insurance under
this title is available. The form shall be established by
regulations issued not later than 270 days after the date of
enactment of the Riegle Community Development and Regulatory
Improvement Act of 1994.
(b) Design and Contents.--
(1) Purpose.--The form under subsection (a) shall be
designed to facilitate compliance with the flood
insurance purchase requirements of this title.
(2) Contents.--The form shall require identification
of the type of flood-risk zone in which the residential
building or mobile home is located, the complete map
and panel numbers for the residential improved real
estate or property on which the mobile home is located,
the community identification number and community
participation status (for purposes of the national
flood insurance program) of the community in which the
residential improved real estate or such property is
located, and the date of the map used for the
determination, with respect to flood hazard information
on file with the Administrator. If the residential
building or mobile home is not located in an area
having special flood hazards the form shall require a
statement to such effect and shall indicate the
complete map and panel numbers of the residential
improved real estate or property on which the mobile
home is located. If the complete map and panel numbers
are not available because the residential building or
mobile home is not located in a community that is
participating in the national flood insurance program
or because no map exists for the relevant area, the
form shall require a statement to such effect. The form
shall provide for inclusion or attachment of any
relevant documents indicating revisions or amendments
to maps.
(c) Required Use.--The Federal entities for lending
regulation shall by regulation require the use of the form
under this section by regulated lending institutions. Each
Federal agency lender shall by regulation provide for the use
of the form with respect to any loan made by such Federal
agency lender. The Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation and the Government
National Mortgage Association shall require the use of the form
with respect to any loan purchased by such entities. A lender
or other person may comply with the requirement under this
subsection by using the form in a printed, computerized, or
electronic manner.
(d) Guarantees Regarding Information.--In providing
information regarding special flood hazards on the form
developed under this section, any lender (or other person
required to use the form) who makes, increases, extends, or
renews a loan secured by residential improved real estate or a
mobile home may provide for the acquisition or determination of
such information to be made by a person other than such lender
(or other person), only to the extent such person guarantees
the accuracy of the information.
(e) Reliance on Previous Determination.--Any person
increasing, extending, renewing, or purchasing a loan secured
by residential improved real estate or a mobile home may rely
on a previous determination of whether the residential building
or mobile home is located in an area having special flood
hazards (and shall not be liable for any error in such previous
determination), if the previous determination was made not more
than 7 years before the date of the transaction and the basis
for the previous determination has been set forth on a form
under this section, unless--
(1) map revisions or updates pursuant to section
1360(f) after such previous determination have resulted
in the residential building or mobile home being
located in an area having special flood hazards; or
(2) the person contacts the Administrator to
determine when the most recent map revisions or updates
affecting such property occurred and such revisions and
updates have occurred after such previous
determination.
(f) Effective Date.--The regulations under this section
requiring use of the form established pursuant to this section
shall be issued together with the regulations required under
subsection (a) and shall take effect upon the expiration of the
180-day period beginning on such issuance.
* * * * * * *
CHAPTER IV--APPROPRIATIONS AND MISCELLANEOUS PROVISIONS
definitions
Sec. 1370. (a) As used in this title--
(1) the term ``flood'' shall have such meaning as may
be prescribed in regulations of the Administrator, and
may include inundation from rising waters or from the
overflow of streams, rivers, or other bodies of water,
or from tidal surges, abnormally high tidal water,
tidal waves, tsunamis, hurricanes, or other severe
storms or deluge;
(2) the terms ``United States'' (when used in a
geographic sense) and ``State'' includes the several
States, the District of Columbia, the territories and
possessions, the Commonwealth of Puerto Rico, and the
Trust Territory of the Pacific Islands;
(3) the terms ``insurance company'', ``other
insurer'' and ``insurance agent or broker'' include any
organization or person that is authorized to engage in
the business of insurance under the laws of any State,
subject to the reporting requirements of the Securities
Exchange Act of 1934 pursuant to section 13(a) or 15(d)
of such Act (15 U.S.C. 78m(a) and 78o(d)), or
authorized by the Administrator to assume reinsurance
on risks insured by the flood insurance program;
(4) the term ``insurance adjustment organization''
includes any organizations and persons engaged in the
business of adjusting loss claims arising under
insurance policies issued by any insurance company or
other insurer;
(5) the term ``person'' includes any individual or
group of individuals, corporation, partnership,
association, or any other organized group of persons,
including State and local governments and agencies
thereof;
(6) the term ``Administrator'' means the
Administrator of the Federal Emergency Management
Agency;
(7) the term ``repetitive loss structure'' means a
structure covered by a contract for flood insurance
that--
(A) has incurred flood-related damage on 2
occasions, in which the cost of repair, on the
average, equaled or exceeded 25 percent of the
value of the structure at the time of each such
flood event; and
(B) at the time of the second incidence of
flood-related damage, the contract for flood
insurance contains increased cost of compliance
coverage.
(8) the term ``Federal agency lender'' means a
Federal agency that makes direct loans secured by
residential improved real estate or a mobile home, to
the extent such agency acts in such capacity;
(9) the term ``Federal entity for lending
regulation'' means the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance
Corporation, the Comptroller of the Currency, the
National Credit Union Administration, and the Farm
Credit Administration, and with respect to a particular
regulated lending institution means the entity
primarily responsible for the supervision of the
institution;
(10) the term ``improved real estate'' means real
estate upon which a building is located;
(11) the term ``lender'' means a regulated lending
institution or Federal agency lender;
(12) the term ``natural and beneficial floodplain
functions'' means--
(A) the functions associated with the natural
or relatively undisturbed floodplain that (i)
moderate flooding, retain flood waters, reduce
erosion and sedimentation, and mitigate the
effect of waves and storm surge from storms,
and (ii) reduce flood related damage; and
(B) ancillary beneficial functions, including
maintenance of water quality and recharge of
ground water, that reduce flood related damage;
(13) the term ``regulated lending institution'' means
any bank, savings and loan association, credit union,
farm credit bank, Federal land bank association,
production credit association, or similar institution
subject to the supervision of a Federal entity for
lending regulation;
(14) the term ``residential improved real estate''
means improved real estate that--
(A) is primarily used for residential
purposes, as defined by the Federal entities
for lending regulation; and
(B) secures financing or financial assistance
provided through a federally related single
family loan progam, as defined by the Federal
entities for lending regulation;
[(14)] (15) the term ``servicer'' means the person
responsible for receiving any scheduled periodic
payments from a borrower pursuant to the terms of a
loan, including amounts for taxes, insurance premiums,
and other charges with respect to the property securing
the loan, and making the payments of principal and
interest and such other payments with respect to the
amounts received from the borrower as may be required
pursuant to the terms of the loan; and
[(15)] (16) the term ``substantially damaged
structure'' means a structure covered by a contract for
flood insurance that has incurred damage for which the
cost of repair exceeds an amount specified in any
regulation promulgated by the Administrator, or by a
community ordinance, whichever is lower.
(b) The term ``flood'' shall also include inundation from
mudslides which are proximately caused by accumulations of
water on or under the ground; and all of the provisions of this
title shall apply with respect to such mudslides in the same
manner and to the same extent as with respect to floods
described in subsection (a)(1), subject to and in accordance
with such regulations, modifying the provisions of this title
(including the provisions relating to land management and use)
to the extent necessary to insure that they can be effectively
so applied, as the Administrator may prescribe to achieve (with
respect to such mudslides) the purposes of this title and the
objectives of the program.
(c) The term ``flood'' shall also include the collapse or
subsidence of land along the shore of a lake or other body of
water as a result of erosion or undermining caused by waves or
currents of water exceeding anticipated cyclical levels, and
all of the provisions of this title shall apply with respect to
such collapse or subsidence in the same manner and to the same
extent as with respect to floods described in subsection
(a)(1), subject to and in accordance with such regulations,
modifying the provisions of this title (including the
provisions relating to land management and use) to the extent
necessary to insure that they can be effectively so applied, as
the Administrator may prescribe to achieve (with respect to
such collapse or subsidence) the purposes of this title and the
objectives of the program.
* * * * * * *
----------
BIGGERT-WATERS FLOOD INSURANCE REFORM ACT OF 2012
* * * * * * *
DIVISION F--MISCELLANEOUS
* * * * * * *
TITLE II--FLOOD INSURANCE
Subtitle A--Flood Insurance Reform and Modernization
* * * * * * *
SEC. 100215. TECHNICAL MAPPING ADVISORY COUNCIL.
(a) Establishment.--There is established a council to be
known as the Technical Mapping Advisory Council (in this
section referred to as the ``Council'').
(b) Membership.--
(1) In general.--The Council shall consist of--
(A) the Administrator (or the designee
thereof);
(B) the Secretary of the Interior (or the
designee thereof);
(C) the Secretary of Agriculture (or the
designee thereof);
(D) the Under Secretary of Commerce for
Oceans and Atmosphere (or the designee
thereof); and
(E) 16 additional members appointed by the
Administrator or the designee of the
Administrator, who shall be--
(i) a member of a recognized
professional surveying association or
organization;
(ii) a member of a recognized
professional mapping association or
organization;
(iii) a member of a recognized
professional engineering association or
organization;
(iv) a member of a recognized
professional association or
organization representing flood hazard
determination firms;
(v) a representative of the United
States Geological Survey;
(vi) a representative of a recognized
professional association or
organization representing State
geographic information;
(vii) a representative of State
national flood insurance coordination
offices;
(viii) a representative of the Corps
of Engineers;
(ix) a member of a recognized
regional flood and storm water
management organization;
(x) 2 representatives of different
State government agencies that have
entered into cooperating technical
partnerships with the Administrator and
have demonstrated the capability to
produce flood insurance rate maps;
(xi) 2 representatives of different
local government agencies that have
entered into cooperating technical
partnerships with the Administrator and
have demonstrated the capability to
produce flood insurance maps;
(xii) a member of a recognized
floodplain management association or
organization;
(xiii) a member of a recognized risk
management association or organization;
and
(xiv) a State mitigation officer.
(2) Qualifications.--Members of the Council shall be
appointed based on their demonstrated knowledge and
competence regarding surveying, cartography, remote
sensing, geographic information systems, or the
technical aspects of preparing and using flood
insurance rate maps. In appointing members under
paragraph (1)(E), the Administrator shall, to the
maximum extent practicable, ensure that the membership
of the Council has a balance of Federal, State, local,
tribal, and private members, and includes geographic
diversity, including representation from areas with
coastline on the Gulf of Mexico and other States
containing areas identified by the Administrator as at
high risk for flooding or as areas having special flood
hazards.
(c) Duties.--The Council shall--
(1) recommend to the Administrator how to improve in
a cost-effective manner the--
(A) accuracy, general quality, ease of use,
and distribution and dissemination of flood
insurance rate maps and risk data; and
(B) performance metrics and milestones
required to effectively and efficiently map
flood risk areas in the United States;
(2) recommend to the Administrator mapping standards
and guidelines for--
(A) flood insurance rate maps; and
(B) data accuracy, data quality, data
currency, and data eligibility;
(3) recommend to the Administrator how to maintain,
on an ongoing basis, flood insurance rate maps and
flood risk identification;
(4) recommend procedures for delegating mapping
activities to State and local mapping partners;
(5) recommend to the Administrator and other Federal
agencies participating in the Council--
(A) methods for improving interagency and
intergovernmental coordination on flood mapping
and flood risk determination; and
(B) a funding strategy to leverage and
coordinate budgets and expenditures across
Federal agencies; [and]
(6) recommend to the Administrator methods or actions
to make the flood mapping processes more efficient;
(7) recommend to the Administrator methods or actions
to minimize any cost, data, and paperwork requirements
of the flood mapping processes;
(8) assist communities, and in particular smaller
communities, in locating the resources required to
participate in the development of flood elevations and
flood hazard area designations; and
[(6)] (9) submit an annual report to the
Administrator that contains--
(A) a description of the activities of the
Council;
(B) an evaluation of the status and
performance of flood insurance rate maps and
mapping activities to revise and update flood
insurance rate maps, as required under section
100216; and
(C) a summary of recommendations made by the
Council to the Administrator.
(d) Future Conditions Risk Assessment and Modeling Report.--
(1) In general.--The Council shall consult with
scientists and technical experts, other Federal
agencies, States, and local communities to--
(A) develop recommendations on how to--
(i) ensure that flood insurance rate
maps incorporate the best available
climate science to assess flood risks;
and
(ii) ensure that the Federal
Emergency Management Agency uses the
best available methodology to consider
the impact of--
(I) the rise in the sea
level; and
(II) future development on
flood risk; and
(B) not later than 1 year after the date of
enactment of this Act, prepare written
recommendations in a future conditions risk
assessment and modeling report and to submit
such recommendations to the Administrator.
(2) Responsibility of the administrator.--The
Administrator, as part of the ongoing program to review
and update National Flood Insurance Program rate maps
under section 100216, shall incorporate any future risk
assessment submitted under paragraph (1)(B) in any such
revision or update.
(e) Chairperson.--The members of the Council shall elect 1
member to serve as the chairperson of the Council (in this
section referred to as the ``Chairperson'').
(f) Coordination.--To ensure that the Council's
recommendations are consistent, to the maximum extent
practicable, with national digital spatial data collection and
management standards, the Chairperson shall consult with the
Chairperson of the Federal Geographic Data Committee
(established pursuant to Office of Management and Budget
Circular A-16).
(g) Compensation.--Members of the Council shall receive no
additional compensation by reason of their service on the
Council.
(h) Meetings and Actions.--
(1) In general.--The Council shall meet not less
frequently than twice each year at the request of the
Chairperson or a majority of its members, and may take
action by a vote of the majority of the members.
(2) Initial meeting.--The Administrator, or a person
designated by the Administrator, shall request and
coordinate the initial meeting of the Council.
(i) Officers.--The Chairperson may appoint officers to assist
in carrying out the duties of the Council under subsection (c).
(j) Staff.--
(1) Staff of fema.--Upon the request of the
Chairperson, the Administrator may detail, on a
nonreimbursable basis, personnel of the Federal
Emergency Management Agency to assist the Council in
carrying out its duties.
(2) Staff of other federal agencies.--Upon request of
the Chairperson, any other Federal agency that is a
member of the Council may detail, on a nonreimbursable
basis, personnel to assist the Council in carrying out
its duties.
(k) Powers.--In carrying out this section, the Council may
hold hearings, receive evidence and assistance, provide
information, and conduct research, as it considers appropriate.
(l) Report to Congress.--The Administrator, on an annual
basis, shall report to the Committee on Banking, Housing, and
Urban Affairs of the Senate, the Committee on Financial
Services of the House of Representatives, and the Office of
Management and Budget on the--
(1) recommendations made by the Council;
(2) actions taken by the Federal Emergency Management
Agency to address such recommendations to improve flood
insurance rate maps and flood risk data; and
(3) any recommendations made by the Council that have
been deferred or not acted upon, together with an
explanatory statement.
(m) Community Flood Maps.--
(1) Standards and procedures.--In addition to the
other duties of the Council under this section, not
later than the expiration of the 12-month period
beginning on the date of the enactment of this
subsection, the Council shall recommend to the
Administrator standards and requirements for chief
executive officers, or entities designated by chief
executive officers, of States and communities
participating in the National Flood Insurance Program
to use in mapping flood hazards located in States and
communities that choose to develop alternative maps to
the flood insurance rate maps developed by the Agency.
The recommended standards and requirements shall
include procedures for providing notification and
appeal rights to individuals within the communities of
the proposed flood elevation determinations.
(2) Exemption from rulemaking.--Until such time as
the Administrator promulgates regulations implementing
paragraph (1) of this subsection, the Administrator
may, notwithstanding any other provision of law, adopt
policies and procedures necessary to implement such
paragraphs without undergoing notice and comment
rulemaking and without conducting regulatory analyses
otherwise required by statute, regulation, or executive
order.
SEC. 100216. NATIONAL FLOOD MAPPING PROGRAM.
(a) Reviewing, Updating, and Maintaining Maps.--The
Administrator, in coordination with the Technical Mapping
Advisory Council established under section 100215, shall
establish an ongoing program under which the Administrator
shall review, update, and maintain National Flood Insurance
Program rate maps prepared by the Administrator, or by a
community pursuant to section 1360(a)(2) of the National Flood
Insurance Act of 1968, in accordance with this section.
(b) Mapping.--
(1) In general.--In carrying out the program
established under subsection (a), the Administrator
shall--
(A) identify, review, update, maintain, and
publish National Flood Insurance Program rate
maps with respect to--
(i) all populated areas and areas of
possible population growth located
within the 100-year floodplain;
(ii) all populated areas and areas of
possible population growth located
within the 500-year floodplain;
(iii) areas of residual risk,
including areas that are protected by
levees, dams, and other flood control
structures;
(iv) areas that could be inundated as
a result of the failure of a levee,
dam, or other flood control structure;
(v) areas that are protected by non-
structural flood mitigation features;
and
(vi) the level of protection provided
by flood control structures and by non-
structural flood mitigation features;
(B) establish or update flood-risk zone data
in all such areas, and make estimates with
respect to the rates of probable flood caused
loss for the various flood risk zones for each
such area; and
(C) use, in identifying, reviewing, updating,
maintaining, or publishing any National Flood
Insurance Program rate map required under this
section or under the National Flood Insurance
Act of 1968 (42 U.S.C. 4011 et seq.), the most
accurate topography and elevation data
available.
(2) Mapping elements.--Each map updated under this
section shall--
(A) assess the accuracy of current ground
elevation data used for hydrologic and
hydraulic modeling of flooding sources and
mapping of the flood hazard and wherever
necessary acquire new ground elevation data
utilizing the most up-to-date geospatial
technologies in accordance with guidelines and
specifications of the Federal Emergency
Management Agency; and
(B) develop National Flood Insurance Program
flood data on a watershed basis--
(i) to provide the most technically
effective and efficient studies and
hydrologic and hydraulic modeling; and
(ii) to eliminate, to the maximum
extent possible, discrepancies in base
flood elevations between adjacent
political subdivisions.
(3) Other inclusions.--In updating maps under this
section, the Administrator shall include--
(A) any relevant information on coastal
inundation from--
(i) an applicable inundation map of
the Corps of Engineers; and
(ii) data of the National Oceanic and
Atmospheric Administration relating to
storm surge modeling;
(B) any relevant information of the United
States Geological Survey on stream flows,
watershed characteristics, and topography that
is useful in the identification of flood hazard
areas, as determined by the Administrator;
(C) any relevant information on land
subsidence, coastal erosion areas, changing
lake levels, and other flood-related hazards;
(D) any relevant information or data of the
National Oceanic and Atmospheric Administration
and the United States Geological Survey
relating to the best available science
regarding future changes in sea levels,
precipitation, and intensity of hurricanes; and
(E) any other relevant information as may be
recommended by the Technical Mapping Advisory
Committee.
(c) Standards.--In updating and maintaining maps under this
section, the Administrator shall--
(1) establish standards to--
(A) ensure that maps are adequate for--
(i) flood risk determinations; and
(ii) use by State and local
governments in managing development to
reduce the risk of flooding; and
(B) facilitate identification and use of
consistent methods of data collection and
analysis by the Administrator, in conjunction
with State and local governments, in developing
maps for communities with similar flood risks,
as determined by the Administrator; [and]
(2) publish maps in a format that is--
(A) digital geospatial data compliant;
(B) compliant with the open publishing and
data exchange standards established by the Open
Geospatial Consortium; and
(C) aligned with official data defined by the
National Geodetic Survey[.];
(3) establish and adopt standards and requirements
for development by States and communities of
alternative flood insurance rate maps to be submitted
to the Administrator pursuant to section 1360(a)(2) of
the National Flood Insurance Act of 1968, taking into
consideration the recommendations of the Technical
Mapping Advisory Council made pursuant to section
100215(m) of this Act (42 U.S.C. 4101a(m)); and
(4) in the case of proposed alternative maps received
by the Administrator pursuant to such section
1360(a)(2), not later than the expiration of the 6-
month period beginning upon receipt of such proposed
alternative maps--
(A) determine whether such maps were
developed in accordance with the standards and
requirements adopted pursuant to paragraph (3)
of this subsection; and
(B) approve or disapprove such proposed maps
for use under National Flood Insurance Program.
(d) Communication and Outreach.--
(1) In general.--The Administrator shall--
(A) before commencement of any mapping or map
updating process, notify each community
affected of the model or models that the
Administrator plans to use in such process and
provide an explanation of why such model or
models are appropriate;
(B) provide each community affected a maximum
30-day period beginning upon notification under
subparagraph (A) to consult with the
Administrator regarding the appropriateness,
with respect to such community, of the mapping
model or models to be used; provided that
consultation by a community pursuant to this
subparagraph shall not waive or otherwise
affect any right of the community to appeal any
flood hazard determinations;
(C) upon completion of the first Independent
Data Submission, transmit a copy of such
Submission to the affected community, provide
the affected community a maximum 30-day period
during which the community may provide data to
Administrator that can be used to supplement or
modify the existing data, and incorporate any
data that is consistent with prevailing
engineering principles;
(D) work with States, local communities, and
property owners to identify areas and features
described in subsection (b)(1)(A)(v);
(E) work to enhance communication and
outreach to States, local communities, and
property owners about the effects--
(i) of any potential changes to
National Flood Insurance Program rate
maps that may result from the mapping
program required under this section;
and
(ii) that any such changes may have
on flood insurance purchase
requirements;
(F) engage with local communities to enhance
communication and outreach to the residents of
such communities, including tenants (with
regard to contents insurance), on the matters
described under subparagraph (E); and
(G) not less than 30 days before issuance of
any preliminary map, notify the Senators for
each State affected and each Member of the
House of Representatives for each congressional
district affected by the preliminary map in
writing of--
(i) the estimated schedule for--
(I) community meetings
regarding the preliminary map;
(II) publication of notices
regarding the preliminary map
in local newspapers; and
(III) the commencement of the
appeals process regarding the
map; and
(ii) the estimated number of homes
and businesses that will be affected by
changes contained in the preliminary
map, including how many structures will
be that were not previously located in
an area having special flood hazards
will be located within such an area
under the preliminary map; and
(H) upon the issuance of any proposed map and
any notice of an opportunity to make an appeal
relating to the proposed map, notify the
Senators for each State affected each Member of
the House of Representatives for each
congressional district affected by the proposed
map of any action taken by the Administrator
with respect to the proposed map or an appeal
relating to the proposed map.
(2) Required activities.--The communication and
outreach activities required under paragraph (1) shall
include--
(A) notifying property owners when their
properties become included in, or when they are
excluded from, an area covered by the mandatory
flood insurance purchase requirement under
section 102 of the Flood Disaster Protection
Act of 1973 (42 U.S.C. 4012a);
(B) educating property owners regarding the
flood risk and reduction of this risk in their
community, including the continued flood risks
to areas that are no longer subject to the
flood insurance mandatory purchase requirement;
(C) educating property owners regarding the
benefits and costs of maintaining or acquiring
flood insurance, including, where applicable,
lower-cost preferred risk policies under the
National Flood Insurance Act of 1968 (42 U.S.C.
4011 et seq.) for such properties and the
contents of such properties;
(D) educating property owners about flood map
revisions and the process available to such
owners to appeal proposed changes in flood
elevations through their community, including
by notifying local radio and television
stations; and
(E) encouraging property owners to maintain
or acquire flood insurance coverage.
(e) Community Remapping Request.--Upon the adoption by the
Administrator of any recommendation by the Technical Mapping
Advisory Council for reviewing, updating, or maintaining
National Flood Insurance Program rate maps in accordance with
this section, a community that believes that its flood
insurance rates in effect prior to adoption would be affected
by the adoption of such recommendation may submit a request for
an update of its rate maps, which may be considered at the
Administrator's sole discretion. The Administrator shall
establish a protocol for the evaluation of such community map
update requests.
(f) Authorization of Appropriations.--There is authorized to
be appropriated to the Administrator to carry out this section
$400,000,000 for each of fiscal years 2013 through 2017.
* * * * * * *
MINORITY VIEWS
H.R. 2246 would repeal the federal requirement to purchase
flood insurance for commercial properties and multifamily
properties with commercial financing. The Federal Disaster
Protection Act requires properties located in a special flood
hazard area with a federally-backed mortgage to be covered with
flood insurance. Under the law, commercial properties must
obtain a maximum of $500,000 of coverage per structure. H.R.
2246 creates a wholesale exemption from this requirement for
all commercial properties regardless of size, sophistication,
or loan amount.
Some stakeholders have argued that the mandatory purchase
requirement is superfluous and cumbersome for large and
sophisticated commercial entities who need coverage well above
the current maximum coverage of $500,000 available from the
National Flood Insurance Program (NFIP). These entities often
purchase flood insurance in the private market because the NFIP
does not provide enough coverage for their needs. But due to
perceived ambiguity as to whether that private policy counts as
compliance with the mandatory purchase requirement, some
entities resort to buying a first-dollar NFIP policy in
addition to an excess private policy rather than simply
purchasing one private policy to cover all of their needs. Some
stakeholders have also expressed concern with the mandatory
purchase requirement as it relates to the purchase of blanket
insurance policies. The NFIP currently does not provide blanket
policies, and instead requires separate policies for each
individual structure. This can be administratively inefficient
and cumbersome for commercial entities with multiple
structures.
H.R. 2246 presents an overly broad solution for issues that
are specific to large commercial entities, and a number of
groups have expressed their opposition to this wholesale
exemption. The Independent Community Bankers, for example,
oppose this provision because it would harm community banks and
small businesses because it increases the likelihood that the
collateral they are securing would be unprotected and likely
suffer a loss in the event of a flood. The flood insurance
take-up rate for properties outside of this mandatory purchase
requirement is extremely low, meaning that most people who
aren't required to buy flood insurance do not purchase it. That
is why a coalition of stakeholders representing the commercial
and multifamily real estate industry have expressed concerns
about affordability challenges for low- and mid-value
properties that will likely opt to forgo flood insurance if
given the choice. This creates a ripple effect in the case of a
flood where the road to recovery is longer and more difficult
for businesses in flood zones.
H.R. 2246 also requires the Federal Emergency Management
Agency (FEMA) to annually cede a portion of its risk to the
private reinsurance or capital markets, which could lead
unnecessarily to higher costs on the NFIP and subsequently
higher premiums on policyholders. The Biggert-Waters Act of
2012, clarified that FEMA has the authority to purchase
reinsurance from the private reinsurance and capital markets
and in the past two years, FEMA has exercised this authority as
appropriate. In January of this year, FEMA agreed to a transfer
of $1.042 billion of the NFIP's financial risk to 25 reinsurers
through January 1, 2018. The reinsurance contract, which cost
FEMA $150 million in premium, requires the reinsurers to cover
26 percent of losses in a single flooding event between $4
billion and $8 billion. According to FEMA, there is a 17.2
percent chance of triggering this clause in 2017. Further, FEMA
intends to use its current authority to make future reinsurance
purchases.\1\
---------------------------------------------------------------------------
\1\See https://www.fema.gov/nfip-reinsurance-program.
---------------------------------------------------------------------------
Notwithstanding FEMA's actions and multi-year plan to
further engage the reinsurance markets, H.R. 2246 would place
cumbersome requirements on FEMA with regard to how much risk it
must cede to the private sector. Specifically, the bill would
require FEMA to make this determination in accordance with a
probable maximum' loss (PML) target, which departs from
traditional PML metrics would hamstring FEMA's ability to
negotiate the best deal possible for the National Flood
Insurance Program and policyholders and appears to be confusing
at best and unworkable at worst.
Lastly, H.R. 2246 would set up a process to supplant FEMA's
Flood Insurance Rate Maps (FIRMs) with private or community
flood maps. The bill would require the Technical Mapping
Advisory Council (TMAC) to develop a set of standards,
guidelines, and procedures that communities would use to
develop alternative flood maps. It is unclear how this would
improve on current law as FEMA already conducts extensive
communication and outreach efforts with the community during
the mapping process, including various minimum waiting periods,
and consideration of any additional data that the community
provides to improve the map. Moreover, today FIRMs cannot go
into effect until a community adopts the map. H.R. 2246 would
flip this process on its head, by requiring FEMA make the final
certification. While this new process may advantage wealthier
communities with the means to take on this-complicated and
technical process, the bill does not provide any finding or
technical assistance for lower-income communities that lack the
resources to do so.
For these reasons, we oppose H.R. 2246.
Maxine Waters.
Keith Ellison.
Michael E. Capuano.
Stephen F. Lynch.
Carolyn B. Maloney.
Joyce Beatty.
Daniel Kildee.
Gwen Moore.
Charlie Crist.
Brad Sherman.
Nydia M. Velaquez.
Al Green.
Gregory W. Meeks.
Vicente Gonzalez.
[all]