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The City Beat

The Biggert-Waters Act

Posted 2:54 PM by

I spent a couple of hours last night at Congresswoman Brook’s office in Carmel with a group of realtors and neighborhood leaders discussing the Biggert-Waters Flood Insurance Act.  If you’ve never heard of it, you probably don’t live in an area designated as a flood plain.  Biggert-Waters was intended to stem the bleeding  (now around $650 billion) from disaster relief due to flooding by eliminating subsidies to older homes flood insurance premiums.


The effect of that Act, which is just starting to be felt locally, is to raise flood insurance premiums, sometimes, as was noted anecdotally last night, by as much as 500%.  Flood insurance is required by mortgage companies (in addition to regular insurance) , on properties in flood plains, assuming you have a mortgage, and, if you don’t have it, but do have a mortgage, the mortgage lender can purchase it, and bill you for it.


The Act, which became effective in October, is already effecting home sales in flood plain areas, not only locally, but state, and nationwide.  Realtors who attended last night’s meeting told us that so far there have been about nine sales of property that would be impacted by the bill.  Seven were cash sales (meaning there’s no mortgage, so no insurance required), one that’s in the process of fighting their designation of being in a flood plain, and one more, wherein the purchaser announced they so loved the house that they were willing to pay the additional $10,000 annual flood insurance premium.  It’s hard to estimate, because they won’t be recorded, how many potential home sales will simply fall though because potential buyers won’t love the house enough to pay an additional $10,000 annually.  


Some homeowners, who weren’t planning to sell, simply won’t be able to afford flood insurance.  We were told, again anecdotally, that right now, mortgage companies aren’t foreclosing on these homes, but most are adding the new premiums on to their escrow bills, which should mean, in fairly short order, that whatever equity the homeowner had in the home will disappear, and the mortgage company will end up owning the home anyway.


As previously noted, this is causing a national uproar, and there are Bills in congress proposing to do something about it, including, interestingly enough, one from the author of the original Act.  We were told that these Bills, which would send the program back for an ‘affordability’ review and delay implementation for at least four years, center around the fact that changing the Bill would be considered a ‘spending’ bill, thus requiring congress, under a self-imposed restriction, to come up with savings, elsewhere, equal to the costs of the changes, and it’s a pretty expensive bill.  We were also told that changes are going to require, to get passed, that a majority of both parties support the changes, and there’s little the two parties agree upon right now.


Locally, there’s some prospect that this will eventually  (and eventually could mean a decade) be resolved by the completion of the White River flood wall, which as noted in previous posts, exists, mostly, to just north of the Riviera Club.   There seems to be a congealing plan to extend the wall south along the existing towpath, to a point just south of Butler’s campus where it would tie in to higher ground and presumably eliminate the Washington Township portion of the flood plain.  I say probably because, as noted below, the Corps., which builds, and FEMA, which designates flood areas, really don’t communicate.  There’s still some argument about who  (the Corps. or the City) would pay for what, but it’s resolvable if cooler minds prevail.  That alternative, also noted previously, would eliminate the silly proposals to build mechanical walls across the City’s water supply.


What’s also interesting is that the northernmost areas within the floodplain, are probably already protected by what’s already been built (assuming there’s not another 1913 flood wherein we’d flood from Iowa to Pennsylvania, irrespective of our wall) but it has no effect on current insurance problems because, oddly, the Corps. and FEMA, the two Federal agencies which are always mentioned together in discussions of these issues, simply don’t ever work together.  Meanwhile, my basement, which isn’t in or near a floodplain, has flooded more recently than Warliegh.


Because it’s a national problem, I’d like to talk a little about this issue in a broader perspective.  Flood insurance probably ought to carry its own weight, but the larger problem is that American’s seem to continue to build where they shouldn’t be building.  Oceans are lovely, but that doesn’t mean you should need to live next to one.  Mosly, flood insurance ought to serve as a major deterrent to new construction in these areas where billions get spent on a regular basis repairing damage that was anticipated and predictable.  My grandparents had an uninsulated shack on the Jersey Shore in the early 1900’s that was expected to be damaged fairly often.  It’s now part of a community of permanent homes.  On the other side of my family, another set of grandparents had an equally disposable shack on the shore of Lake Michigan, also now a part of a permanent community of year round homes.  But, both are entirely different than areas of the Midwest which last flooded when the Cubs were in the World Series.


New Orleans, except to keep the Mississippi delta open, probably shouldn’t have been rebuilt in its original location.  Rocky Ripple shouldn’t have been allowed to develop beyond its original incarnation as prime farmland.  Our shorelines ought to be destinations, not residences.   Yet we protect our bad decisions of the past because they did develop, and the scale of injury, once they were developed, is such that, unless we can really protect the injuries from recurring over an over again, we ought to prevent.


Insurance companies have traditionally created risk pools based upon reasonable likelihood of occurrences.  Flood insurance programs ought, but aren’t, be made to operate the same way.


Comments (11)
cmc wrote
I know a lot about this topic and you have captured the situation in a very accurate and balanced manner.
Posted Dec 12 2013 12:11 PM
City Beat Blogger wrote
Thank you for taking the time to discuss flood insurance the other evening with my colleagues and me. Congresswoman Brooks greatly appreciates your time as well as insight and we will update you regularly as to what is happening in Washington. As you know, the National Flood Insurance Program (NFIP) was created by Congress in 1968 enabling property owners to purchase insurance from the government against loss from flooding. The Federal Emergency Management Agency (FEMA) administers the program by developing flood hazard maps that are used to set flood insurance rates, regulate floodplain development, and inform those who live in the “100-year” floodplain of potential hazards. The NFIP was a self-supporting program between 1986 and 2005. Since 2005, FEMA has had to borrow nearly $20 billion from the U.S. Treasury to pay claims. In July 2012 after four years of debate surrounding flood insurance and before Congresswoman Brooks was sworn into Congress, the Biggert-Waters Flood Insurance Reform Act of 2012 was passed and signed into law. This legislation made a number of reforms to strengthen the future financial solvency and administrative efficiency of the NFIP by raising historically low premiums and reducing homeowners’ incentives for rebuilding in flood risk zones. We understand these changes have led to drastically increased insurance premiums for some Hoosiers. In response to this increase, the Congresswoman voted in favor of an amendment to the Department of Homeland Security (DHS) appropriations bill offered by Congressman Bill Cassidy of Louisiana that delays this premium increase. The amendment, which passed the House on June 5, would delay Sec. 207 of the Biggert-Waters Act which would have ended grandfathered NFIP rates for existing policy holders. This amendment was not a comprehensive fix to the affordability challenges, but a step in the right direction. The Senate did not take up the House Homeland Security appropriations bill so this amendment did not become law. A heated debate continues in Congress on how to address this issue for those impacted. The Congresswoman is closely following ongoing negotiations on how best to address this problem. As I mentioned during our conversation, there is still the potential for the House of Representatives to vote on a bill this week addressing some of your concerns. Late Tuesday night legislation was released that would “clarify the application of the Biggert-Waters Flood Insurance Reform Act of 2012 to premium rates for certain properties.” The legislation would delay any change in risk premium rates for flood insurance affected by section 207 of the Biggert – Waters bill, lifts the $750,000 cap on spending for affordability studies and it would establish monthly installment payments for premiums (please see the attached document for a section by section of the bill). We have heard this bill will be considered on the House floor this week, but as you may know there is a lot going on this week in Congress with the budget negotiations and this flood insurance fix is constantly evolving. I just wanted to update you and provide you with an opportunity to review the legislation at this link - Bill Text - http://docs.house.gov/billsthisweek/20131209/BILLS-113hrFlood-SUS.pdf If you have any specific questions please feel free to contact me. We will certainly keep you updated if the bill does come to the floor for a vote. Thanks, Emily BellRep. Susan W. Brooks (IN-5)Legislative Assistant1505 Longworth HOBWashington, D.C. 20515Tel: (202)-225-2276
Posted Dec 12 2013 4:43 PM
Bill Beranek wrote
Jim's note captured the situation with great insight.I would like to expand a bit on his observation that within ten years there will likely be flood protection adequate to remove many of the Mid-Town Indianapolis properties from the White River 100-year flood plain.The status of that flood protection is that for the canal berm enhancement flood levee solution to be funded by the US Corps of Engineers, the City must provide the Corps enough information soon for the Corps to change its mind about its current preference for a flood wall and gate across the canal and then revise its Environmental Impact Statement.Neither the Corps preferred options nor the enhanced canal berm levee option protects Rocky Ripple but the canal-berm levee option does not wall the neighborhood off and it does provide a basis from which a separate better flood protection for Rocky Ripple could be constructed.The next task for community leaders is to develop adequate and equitable funding to complete the flood levee project. Projects with Corps engagement can be funded with up to 75% from federal government. That still requires a local match for capital cost and local resources to maintain the levee system.For federal funding to happen requires the Corps to rank it high enough on its internal project priority scale and for Congress to provide the Corps adequate funding to reach that priority ranking. Local leaders can encourage both Congress and the Corps in their decisions.For local funding, the fund the City is considering using, namely the Storm Water Management Fund (from storm water fee revenues on most properties in Marion County) is currently grossly inadequate even to address pressing storm water flooding projects from precipitation on Marion County properties.The City DPW is proposing to increase the fees by 37% and decrease the amount of credits to address many backlogged projects including funding the flood levee match to a Corps project but that request has so far had difficulty gaining enough support to be adopted.Some are exploring creation of a flood levee district for the Broad Ripple to Rocky Ripple area (or some subset) dedicated to funds from fees on protected properties and other sources to get properties out of the FEMA 100-year flood Plain and keeping them out.If the Corps of Engineers is unable to fund a project, then the City would need to fund the entire project by itself. That would make a flood levee district even more important. The City could design that flood protection project for the FEMA 100-year flood standards which likely would be a less expensive structure than the larger, less frequent flood event the Corps has designed its project to protect against.Any solution for the Broad Ripple/Warfleigh/Butler-Tarkington Flood Plain must be done simultaneously with a solution for the Butler University/Rocky Ripple Flood Plain, even if the projects are implemented independently of each other.Regardless, now is the time to begin the debate about who would be willing to pay how much to ensure that the worst impacts of Biggert-Waters (or whatever it becomes) on the equity of property in the White River Flood Plain is eliminated?
Posted Dec 13 2013 8:37 PM
Zach Cattell wrote
Though a delay of Sec. 207 of Biggert-Waters would fend off rate increases due to revisions of flood insurance rate maps, which would be a small step in the right direction, delaying that section alone is insufficient for Hoosiers. Sec. 207 requires rate increases in the event flood maps are revised, even for existing policy holders. This section is most problematic in the gulf states and east coast where maps are now being revised due to the aftermath of Katrina and Sandy, respectively. Conversely, new flood maps are on hold for Marion County according to FEMA. What should also be delayed, in addition to Sec. 207, is Sec. 205 of the Act. In addition to immediate increases on businesses and non-primary residences (and some other structures), Sec. 205 requires all new policies issued after enactment, including those for primary residences, to be issued at the new actuarial rates. It is Sec. 205 that is prohibiting the sale of properties in our area today because buyers are not willing to pay that astronomical rate, and sellers are stuck with a devalued asset. If the CBO score is too high and pay-fors cannot be found to delay all of Sec. 205, then at least a delay as applied to primary-residences should be passed.
Posted Dec 14 2013 10:05 PM
City Beat Blogger wrote
As you may be aware, the House did not consider the Flood Insurance Relief & Transparency Act of 2013 before the House recessed for the holidays. We have learned there was not enough bipartisan support for the bill so we hope negotiations continue when the House reconvenes January 7th. In the mean time we will be following the Senate’s action closely should they take anything up for consideration that would impact NFIP. As always, if you have any questions please do not hesitate to ask. Emily BellRep. Susan W. Brooks (IN-5)Legislative Assistant1505 Longworth HOBWashington, D.C. 20515Tel: (202)-225-2276
Posted Dec 16 2013 3:06 PM
City Beat Blogger wrote
Dear All,An update from our Washington Office:As promised, we want to update you on the debate in Congress regarding legislation that would impact the National Flood Insurance Program (NFIP). During our last update we were hopeful that negotiations would continue over the holidays, and I'm glad to report they have in both the House and Senate. Majority Leader Cantor included flood insurance reform in his winter legislative priority update which is promising. Also as you may be aware, Senate bill S. 1610, the Flood Insurance Affordability Act of 2013, seems to be gaining support and could potentially be brought up as early as next week in the Senate for a vote. The Senate rules allow for a number of procedural votes and I will be watching those carefully. As with most things in Washington, this could quickly change. Please know we will continue to follow this debate closely and weigh in with how this issue is affecting our constituents as the negotiations continue. As always, if you have any questions please do not hesitate to ask.Karen K. GlaserDistrict DirectorOffice of Congresswoman Susan W. Brooks (IN-5)11611 N. Meridian St., Suite 415Carmel, IN 46032317.848.0201 (office)317.846.7306 (fax)800.382.6020 (toll-free)
Posted Jan 10 2014 11:00 PM
City Beat Blogger wrote
Dear all,An update regarding Biggert Waters and NFIP:As you may be aware, the Senate passed S. 1926 yesterday with a vote of 67-32. This legislation would delay for up to four years the increases in homeowners' flood-insurance premiums triggered by updates to flood maps. It is unclear yet if the House will vote on this legislation or continue negotiations on a separate piece of legislation. The Senate legislation remains a hot topic of discussion because of the length and cost of a delay. Please know we will continue to follow this debate closely. As always, if you have any questions please do not hesitate to ask.Best,Karen K. GlaserDistrict DirectorOffice of Congresswoman Susan W. Brooks (IN-5)
Posted Jan 31 2014 10:52 PM
City Beat Blogger wrote
Dear all,Emily, our legislative aide following the flood insurance legislation, asked me to pass along this update:I wanted to provide you a quick update on flood insurance legislation in the House. Majority Leader Cantor has told House Republicans that we will vote on a flood insurance fix the week of Feb. 24th. The bill text and specific details have not been released, but we will update you with specifics as soon as we can.As always, don't hesitate to contact me with any questions.Best,KarenKaren K. GlaserDistrict DirectorOffice of Congresswoman Susan W. Brooks (IN-5)
Posted Feb 19 2014 2:32 PM
Norfolk76 wrote
New legislation was announced yesterday which addresses concerns with BW12. The House legislation provides relief through several measures, specifically:1. Repealing section 207 of BW-12 and reinstating grandfathering permanently. This means catastrophic rate increases will not occur because of FEMA remapping. 2. Repealing home sale/new policy rate increase triggers (in Section 205) so the person buying the home is treated the same as the person selling it.3. Providing a retroactive refund for people who already realized huge increases due to the sale/purchase of a home.Suggest we all write into our representatives to encourage support.
Posted Feb 22 2014 12:23 PM
City Beat Blogger wrote
Posted Feb 25 2014 4:54 PM
City eat Blogger wrote
Hi everyone – I wanted to provide an update on flood insurance as there have been several changes since my last email. Please feel free to forward this note to others and contact our office if you have questions. Legislative Update – some flood reform passed in early 2014, but it primarily related to the delay of the rate hikes for areas receiving new flood maps. Most of our impacted clients are receiving rate changes due to change in ownership. There is additional relief that has passed the Senate and we’ve heard that the House will be voting on a version of that bill as early as sometime this week. It is unclear exactly what the relief will be and I will send another update when we learn more. National Flood Insurance Policies – we are working with some clients to place a “tentative rate” policy with NFIP. This is typically a lower rate than their full risk rate – especially if the home has a basement. This is a good strategy for clients who are facing increases due to a purchase before the new rates were available – now they are looking at a much higher rate at renewal. They will still be subject to “full rates” after a year on tentative rates, but it does buy them some time. If you have questions from clients regarding their renewal letter be sure to send them to us for answers or to their licensed insurance professional before they go through the expense of an elevation certificate as there may be other options. The tentative rates can also be used for new home buyers, but it is important that they understand it is not their “forever” rate, just a lower rate that they can use for a year. We have also found that some people do actually benefit from getting the elevation certificate and quoting the actual rate with NFIP – this would be for clients on the fringes of the flood zone and/or those who are on a slab or raised foundation. Private Market Flood Insurance – there is a new private insurer that is offering flood policies at a reduced rate from the NFIP policies. At this point, we are not clear regarding lender approval of this provider and/or their claims paying ability. If they are determined to be viable from a lender perspective, this may be the best long term option to ensure our real estate market stays stable. Our office cannot write these policies due to our agency agreement, but we do have a referral partner that can place the policy. Elevation certificates are not required and rates are fixed based upon rebuild cost of the home. For general comparison purposes, a $150,000 home has an annual premium of about $1,500 and a $250,000 home has an annual premium of about $2,500. This may be a great option for your buyers looking at homes in a flood zone or even for your sellers to provide this in their homes as a resource. The website to learn more is www.privatemarketflood.com. Unfortunately, if someone has an NFIP policy they cannot move to the private market policy mid-term, but we will be working with all of our clients at their next renewal to evaluate this as an option. Feel free to continue to use our office as a resource to answer all of your flood insurance questions, we are happy to help in any way we can! Sincerely,Elizabeth Elizabeth Marshall State Farm Broad Ripple | Elizabeth Marshall, Agent6124 N College AvenueIndianapolis, Indiana 46220 317.255.2700 office
Posted Feb 25 2014 5:35 PM
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