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 The leaders of the House Financial Services Committee say they are
standing behind last year's bipartisan legislation to put the flood
insurance program on sounder financial footing even as the
implementation of the law has sparked a chorus of complaints from
constituents fearing spikes in premiums and plummeting home values.
In the Senate, attempts to call a quick floor vote on legislation to
delay the changes in the program — designed to force higher premiums
on properties especially at risk of flooding — appear to face
opposition from both Democrats and Republicans.
Sen. Mary Landrieu, D-La., wants to add the measure to an unrelated
defense policy bill, but Majority Leader Harry Reid, D-Nev., is
restricting the ability of senators to offer unrelated amendments.
Meanwhile, Republicans are unlikely to allow a vote that could give
Landrieu, who faces a tough re-election bid next year, the chance to
claim political credit.
The curbs on taxpayer-subsidized flood insurance rates are a case
study in what happens when Washington takes away a
government-sponsored benefit that helps a relatively small group of
people.
About 1.1 million homeowners — or 1 in 5 in the program — have
received taxpayer-subsidized rates and the government has financed
about 60 percent of losses on their properties. Most people can
retain the subsidies but can't pass them along to people buying
their home, a restriction that's especially burdensome to
lower-income older homeowners seeking to sell their houses.
The changes also promise to make it unaffordable for people in
chronic flood zones to keep their homes, and they have put a damper
on home sales in areas where benefits extended to current homeowners
can't be passed along to prospective buyers.
The quandary is especially felt by conservative Republicans torn
between their philosophy of limited government and helping
constituents facing sharply higher flood insurance premiums.
Lawmakers trying to delay the law's implementation cite horror
stories of people slapped with unaffordable premium increases on
modestly priced homes.
Supporters of the law say it's mostly operating as intended, which
is to hit at-risk homeowners with actuarially sound rate increases.
"What we're trying to do is separate fact from fiction here. And
we're hearing a lot of rumors. And some of those rumors ... it turns
out are not as represented," said Rep. Randy Neugebauer, R-Texas,
who chaired a hearing Tuesday of the Financial Services Committee's
housing and insurance subcommittee. "We do know that there are some
people out there who are going to experience higher premiums. But,
you know, that was the purpose."
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Last year's legislation promises premium increases to 1.1 million
homeowners who've received subsidized, below-risk coverage and could
sock even more homeowners whose homes met older building standards
or were deemed at lower risk under previous flood maps. Under the
old rules, they could retain their old rates since they followed the
rules when they bought or built their homes, but they will soon lose
those grandfathered rates under the new law.
The Federal Emergency Management Agency, which administers the
program, has delayed implementation of the new grandfathering rules
and has re-evaluated its policies to give homeowners the benefit of
the doubt in instances in which older, locally built levees have
protected neighborhoods for decades but don't meet federal
standards.
The changes in the program are most acutely felt in places like the
Gulf Coast, the New Jersey shore and Florida.
"There are challenges to implementing the law when premiums may
exceed $10,000 or in more high-risk areas where homes are not easily
elevated or bought out," said FEMA Administrator Craig Fugate. He
noted that in the Gulf region, many middle-class workers need
insurance to live near their jobs in industries like fishing, trade
and oil exploration.
Some conservative Republicans are adopting a "tough-love" approach
to implementing the law.
"The fundamental question posed by the flood insurance reform bill
is one of fairness. Is it fair for everyone to subsidize the
insurance of a few?" asked Rep. Lynn Westmoreland, R-Ga. "The answer
is simple. Taxpayers should not continue to subsidize the flood
insurance of those who live in flood-prone areas. It's not fair."
The much-criticized program has long offered below-cost rates for
homeowners in flood zones and has racked up about $25 billion in red
ink since its creation in 1968. It has been criticized for
repeatedly paying off homeowners whose houses get flooded every few
years.
The flood insurance program collects $3.5 billion in premiums each
year, but FEMA says $1.5 billion more is required from subsidized
policyholders to put it on sound financial footing as required by
last year's changes.
Financial Services Chairman Jeb Hensarling, R-Texas, didn't attend
Tuesday's hearing, but a committee statement noted the "importance
of implementing the ... Flood Insurance Reform Act in order to
protect taxpayers from having to continue bailing out" the flood
insurance program.
[Associated
Press; ANDREW TAYLOR]
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