Ahead of a House subcommittee hearing on the implementation of the 2012 Biggert-Waters Flood Insurance Act, The National Association of Federal Credit Unions recently called on lawmakers to delay triggered increases in premiums until a mandated affordability study is conducted.
“Failure to act in this regard could mean that premiums will skyrocket for many Americans struggling in these uncertain times,” Brad Thaler, the vice president of legislative affairs at NAFCU, said in a Monday letter to House Financial Services Subcommittee on Housing and Insurance Chairman Randy Neugebauer (R-Texas) and Ranking Member Michael Capuano (D-Mass.). “New premiums could be unaffordable to many, dropping home values in a tenuous economy. We are already hearing reports from our member credit unions that these impacts are beginning to materialize, so any action on this matter must be timely.”
Some NFIP premiums are scheduled to increase this year, though the Federal Emergency Management Agency said the increases will primarily apply to individuals whose policies are currently subsidized—approximately 20 percent of policyholders—and will have the most significant impact on properties in a “special flood hazard area.”
Sen. Charles Schumer (D-N.Y.) introduced legislation—the Homeowner Flood Insurance Affordability Act—to delay increases in premiums for approximately four years from the bill’s date of passage, until FEMA completes the affordability study, USA Today reports.
“Instituting rate hikes before the affordability study can be completed is putting the cart before the horse,” Schumer said, according to USA Today. “Plus, those homeowners that are ultimately affected should have adequate time to plan for the rate increases.”
The Obama Administration has suggested a different solution that involves granting waivers from higher premiums to low-income homeowners.
The rate increases are the result of a provision of Biggert-Waters that calls for a 25 percent increase in premiums every year for four years in order to recoup deficits caused by Hurricane Katrina and to align NFIP operations with their real costs, USA Today reports.