Congress' Passage of Federal Flood Insurance Bill Guarantees Extension of Program Until 2008

WASHINGTON – Nine days before a temporary six-month extension of the Federal Emergency Management Agency’s (FEMA) National Flood Insurance Program was due to expire, Congress unanimously approved by voice vote the Bunning-Bereuter-Blumenaur Flood Insurance Reform Act of 2004 (S.2238) that reauthorizes the National Flood Insurance Program and enacts reforms to reduce taxpayer burden of repetitive flood insurance claims in flood prone areas and flood mitigation. The Senate passed its version of the measure June 15. S.2238 reflects legislation passed by Congress in November 2003 – H.R. 253. Rep. Doug Bereuter (R-Neb.), who sponsored that measure, hailed S.2238 saying it “would at last move the NFIP towards a more free-market insurance model by requiring people living in flood-prone areas to reduce their risk of flooding or pay higher premiums.” Rep. Earl Blumenauer (D-Ore.) called S.2238 “a win for federal taxpayers, local communities, flood insurance ratepayers and our environment.” Credit unions were particularly interested in the bill because flood insurance is required by law in flood-designated areas to obtain mortgages. NAFCU President/CEO Fred Becker commented on the bill’s passage saying, “NAFCU has consistently urged Congress to reauthorize flood insurance so that credit unions and all financial institutions would not face possible interruptions in the processing of new flood insurance policies. We are very pleased Congress has taken the initiative to reform the flood insurance program and importantly to reauthorize it into September 2009.” CUNA’s Gary Kohn, VP Legislative Affairs and Senior Legislative Counsel, said the trade association was “thrilled the measure was passed because it will be an enormous help to credit union members who often times can’t get a mortgage unless they’re covered under the flood insurance program. So it’s very important for them to have this program in place.” Among the provisions of S.2238, it reauthorizes flood insurance for the next five years instead of on an annual basis as it had been previously. It also establishes a pilot program for mitigation of severe repetitive loss properties and permits the Federal Emergency Management Agency director to provide financial assistance to states and communities taking actions to mitigate flood damage to properties and losses to the National Flood Insurance Fund. In fiscal years 2004-2008, the amount used by the National Flood Insurance Fund cannot exceed $40 million. Such actions, the bills reads, include “elevation, relocation, demolition, and floodproofing of structures, and minor physical localized flood control projects.” S.2238 also addresses discretionary actions the FEMA director can take in cases of fraudulent claims. According to the measure, if the director determines a fraudulent claim was made under flood insurance coverage for a severe repetitive loss property, the director can cancel the policy and deny the provision to the policyholder of any new flood insurance coverage, and refuse to renew the policy with the policyholder when it expires. The NFIP was established by Congress in 1968. Before then, many homeowners weren’t able to insure against flood losses because private insurers didn’t offer flood insurance. Since 1969, the NFIP has paid $12.7 billion for flood insurance claims and related costs. A release from the House Committee on Financial Services included a statement that “federally-backed flood insurance is available in communities that agree to adopt and enforce floodplain management ordinances designed to reduce flood damage. About 4.5 million people currently hold flood insurance policies in more than 20,000 communities” in the U.S. -