FEMA says a change in ownership will no longer trigger flood insurance increases for new owners

By Bruce Alpert, NOLA.com | Times-Picayune 

May 6, 2014

WASHINGTON -- In what likely will be a boost to home sales, the Federal Emergency Management Agency has repealed a provision of the 2012 Biggert-Waters law that made it impossible for new home or business buyers to assume the property's existing flood insurance policy.

Sen. Mary Landrieu, D-La, said FEMA's flood insurance administrator David Miller informed her Tuesday that the agency officially stopped implementing a Biggert-Waters provision Thursday (May 1) that had ended subsidized premiums for new owners of businesses and homes built before flood rate maps were established for their communities.

In some cases, the rate increases were substantial, double, triple, even 10 times or more previous premiums.

That Biggert-Waters provision was eliminated under the Homeowner Flood Insurance Affordability Act, signed into law March 21 by President Barack Obama after passing the House and Senate earlier that month.

The change announced by FEMA Tuesday affects up to 82,000 properties in Louisiana -- and 1.1 million nationwide, according to Landrieu's office.

"For many middle class families, the single-most important investment is their home. Biggert-Waters threatened to eliminate the equity they had built and rob them of their most valuable asset," Landrieu said.

Realtors said property values dropped, sometimes significantly, because Biggert-Waters made the homes virtually unsellable, given the higher premiums new owners faced when the flood insurance policy came up for renewal.

"The elimination of the property sales penalty will restore confidence in the real estate market and allow up to 82,000 middle class families in Louisiana to continue living where they work to produce the goods and products necessary for continued economic growth," Landrieu said.

Landrieu said she asked Miller during their conversation to quickly develop a system to reimburse homeowners who have already begun paying higher premiums because of Biggert-Waters elimination of subsidized rates for pre flood insurance rate map properties that were sold, or in cases where flood insurance coverage lapsed.

Sen. David Vitter, R-La., said it's about time FEMA acted.

 "Now that it's been nearly two months since we passed this law, it is past time for FEMA to act," Vitter said. "If they hadn't made this decision, folks could literally lose their homes -- a risk that this law was meant to prevent against. Until new rates are issued, home owners will live under the threat of permanently high rates if their policies lapse."

Rep. Bill Cassidy, R-Baton Rouge, the co-sponsor with Rep. Michael Grimm, R-N.Y., of the House legislation to provide relief from the most adverse impacts of Biggert-Waters, has scheduled a conference with FEMA Thursday to discuss how the agency is moving to ease the most cumbersome provisions of Biggert-Waters.

"It's essential that FEMA works quickly to implement these reforms so that flood insurance remains both accessible and affordable for families," Cassidy said. "I welcome the opportunity to provide greater transparency and accountability on FEMA's implementation of the flood insurance bill that became law earlier this year."

Under the Homeowner Flood Insurance Affordability Act, premiums can still rise, but the agency is supposed to strive to insure that rates don't rise more than 18 percent per year.