nfip reform-act-take-2

What You Need To Know – Florida Association of Realtors District 1

Lisa S. Jones, CFM, CPM, ANFILisa S. Jones, CFM, CPM, ANFILisa S. Jones, CFM, CPM, ANFILisa S. Jones, CFM, CPM, ANFI

3/27/2014 © Carolina Flood Solutions LLC

3/27/2014 © Carolina Flood Solutions 2

The NFIP Reform is no fairytale

Homeowner Flood Insurance Affordability Act of 2014

(GW-HR3370)

Biggert-Waters NFIP Reform Act of 2012

BW-12

•Reauthorized the National Flood Insurance

Program (NFIP) for 5 years through September

30, 2017

•Focus was fiscal solvency of program

•Signed July 6, 2012

Homeowners Flood Insurance Affordability Act

(HFIAA) of 2014

•Retreat from some BW-12 provisions, set some

longer glide paths to full risk rating

•Signed March 21, 2014

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Section 3. (gSection 3. (gSection 3. (gSection 3. (g) NO EXTENSION OF SUBSIDY TO NEW POLICIES OR ) NO EXTENSION OF SUBSIDY TO NEW POLICIES OR ) NO EXTENSION OF SUBSIDY TO NEW POLICIES OR ) NO EXTENSION OF SUBSIDY TO NEW POLICIES OR LAPSED POLICIESLAPSED POLICIESLAPSED POLICIESLAPSED POLICIES....—

The Administrator shall not provide flood insurance to prospective insured's at rates

less than those estimated under subsection (a)(1), as required by paragraph (2) of

that subsection, for—

(1) any property not insured by the flood insurance program as of the date of

enactment of the Biggert-Waters Flood Insurance Reform Act of 2012;

(2) any property purchased after the date of enactment of the Biggert-Waters Flood

Insurance Reform Act of 2012;

((((3) any policy under the flood insurance program 3) any policy under the flood insurance program 3) any policy under the flood insurance program 3) any policy under the flood insurance program that has that has that has that has lapsed in coverage,lapsed in coverage,lapsed in coverage,lapsed in coverage, as a as a as a as a

result of the deliberate result of the deliberate result of the deliberate result of the deliberate choice of choice of choice of choice of the holder of such policy; the holder of such policy; the holder of such policy; the holder of such policy; unless the decision of the unless the decision of the unless the decision of the unless the decision of the

policy holder to permit the lapse in coverage was as a result of the property covered policy holder to permit the lapse in coverage was as a result of the property covered policy holder to permit the lapse in coverage was as a result of the property covered policy holder to permit the lapse in coverage was as a result of the property covered

by the policy no longer being required to retain such coverage;by the policy no longer being required to retain such coverage;by the policy no longer being required to retain such coverage;by the policy no longer being required to retain such coverage;

(4) any prospective insured who refuses to accept any offer for mitigation assistance

by the Administrator (including an offer to relocate), including an offer of mitigation

assistance—

(A) following a major disaster, as defined in section 102 of the Robert T. Stafford

Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122); or

(B) in connection with—

(i) a repetitive loss property; or

(ii) a severe repetitive loss property.

Grandfathering Subsidy EliminationGrandfathering Subsidy EliminationGrandfathering Subsidy EliminationGrandfathering Subsidy Elimination

• Section Section Section Section 207 (207 (207 (207 (result of a map changeresult of a map changeresult of a map changeresult of a map change) ) ) ) eliminated; eliminated; eliminated; eliminated;

however it was replaced with new grandfathering

section

• Existing grandfathered policies to continue to be

grandfathered . . . but

• New policies New policies New policies New policies (after date of enactment of HFIAA) for

properties newly identified in SFHAs will be on a glide

path to full actuarial rates.� Year 1 . .PRP rates

� After year 1:rate increase path for phase-out of pre-FIRM subsidy

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All All All All policies get a policies get a policies get a policies get a newnewnewnew ANNUAL surcharge: ANNUAL surcharge: ANNUAL surcharge: ANNUAL surcharge:

• $25 for primary residence properties,

• $250 for non-residential properties and non-primary

residential properties.

The surcharges would be deposited in the NFIP Reserve NFIP Reserve NFIP Reserve NFIP Reserve

FundFundFundFund, which was established to ensure funds are

available for meeting the expected future NFIP

obligations.

New 1% goalNew 1% goalNew 1% goalNew 1% goal

� FEMA is instructed to try and minimize the number

of policies with annual premiums that exceed one

percent of the total coverage provided by the policy

�Existing V-Zone rates already exceed this!

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• Optional deductibles Optional deductibles Optional deductibles Optional deductibles as high as 10,000 for residential properties &

mandatory disclosure disclosure disclosure disclosure of optional deductibles and consequences;

• Waives the Mandatory Purchase Waives the Mandatory Purchase Waives the Mandatory Purchase Waives the Mandatory Purchase of flood insurance for detached detached detached detached

structures;structures;structures;structures;

• Restores the substantial improvement substantial improvement substantial improvement substantial improvement threshold back to 50% FMV50% FMV50% FMV50% FMV

• Flood Insurance Rate Map Certification Flood Insurance Rate Map Certification Flood Insurance Rate Map Certification Flood Insurance Rate Map Certification

• Successful map appeal expense reimbursement: Successful map appeal expense reimbursement: Successful map appeal expense reimbursement: Successful map appeal expense reimbursement: adds communities

• Designation of a Flood Insurance Advocate for homeowners on:Designation of a Flood Insurance Advocate for homeowners on:Designation of a Flood Insurance Advocate for homeowners on:Designation of a Flood Insurance Advocate for homeowners on:

• Flood Insurance;Flood Insurance;Flood Insurance;Flood Insurance;

• Map appeals, Map appeals, Map appeals, Map appeals,

• Risk; and,Risk; and,Risk; and,Risk; and,

• MitigationMitigationMitigationMitigation

• Requires an Affordability Framework

• Study of Voluntary Community-Based Flood Insurance Options

• Requires mapping of non-structural flood mitigation features such forests, marshlands, etc.

• Requires FEMA to clearly communicate full flood risk determinations to individual property owners regardless of whether their premium rates are full actuarial rates

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• Preserves basic structure of BWPreserves basic structure of BWPreserves basic structure of BWPreserves basic structure of BW----12121212, does not repeal most of it

• It modifiesmodifiesmodifiesmodifies some annual increases some annual increases some annual increases some annual increases and generally increases glide path to full actuarial rates

• Contrary to the name, it did not do much to address flood insurance affordability

� Addressed immediately going to full risk rates upon sale

or new policy .. . Good

� Some provisions nibble around the edges

� Lots of studies . . .no implementation or even pilots

� Some peoples total policy costs will be higher under

HFIAA than under BW-12!

All subject to FEMA’s final interpretation!All subject to FEMA’s final interpretation!All subject to FEMA’s final interpretation!All subject to FEMA’s final interpretation!11

• Primary residence changes from 80% occupancy to 50%

• Will be verified with:� Driver’s license

� Automobile registration

� Proof of insurance for a vehicle

� Voter’s registration

� Documents showing where children attend school

� Homestead Tax Credit Form for Primary Residence

• Coverage amount increase to $500,000 for 5-or-more-

unit residential structures contents remains at

$100,0000.

A building that will be lived

in for 80 percent or more

of the year (292 days or

approx 10 months).

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Changes to 50%

on June 1, 2014

•Flood Insurance is required• Federally backed Mortgage in a SFHA

• Structure located in Zones

AE (A1-A30), VE (V1-V30), V , AH, AO, A

• Flood insurance required for secured Property located in a SFHA

• Coverage Required- Amount of loan

� Down payment? Is policy holder underinsured?

� Proper rating

• OptionalOptionalOptionalOptional for Zones B, C, or X for Zones B, C, or X for Zones B, C, or X for Zones B, C, or X –––– Maybe eligible for Maybe eligible for Maybe eligible for Maybe eligible for Preferred Risk Policy Preferred Risk Policy Preferred Risk Policy Preferred Risk Policy ---- cheap & simple applicationcheap & simple applicationcheap & simple applicationcheap & simple application

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•FEMA Map Service Center

https://msc.fema.gov

•Community Official

•Current Home Owner’s Elevation Certificate, or NFIP Policy’s Declaration’s Page

•Flood Hazard Determination Form

•Prior Letter of Map Change

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•Flood insurance may not be available

depending on when the structure was

built, substantially damage or

improved compared with the CBRS or

OPA Designation date

•Appeals to boundaries decided by US Fish

and Wildlife Service not FEMA.

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Substandard

Levee

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• Peace of Mind Coverage (Structures

located in B, C or X Zones)

• Participating Communities in the

Regular Program

• Coverage Available

� Contents only

� Building and Contents

• Limited Loss History Eligibility

Requirements

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•Provides for continuous coverage

•Current policy holder can transfer docs (e.g.,

elevation certificate, etc.)

•Grandfathered rates (subsidized rates, except

Pre-FIRM, Non-primary) available until

further notice from FEMA.

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• Does Community Participate in the NFIP? CRS Discount?

• Date of construction

�Pre-/Post-FIRM

• Structure/Property located in the floodway? CBRS or OPA?

�Impacts ability to improve, expand or use and may increase costs

• ASK - Any prior flood claims or Flooding history? Repetitive Loss?

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Timetable for change:Timetable for change:Timetable for change:Timetable for change:

• FEMA has up to 8 months to develop the guidance for the FEMA has up to 8 months to develop the guidance for the FEMA has up to 8 months to develop the guidance for the FEMA has up to 8 months to develop the guidance for the

insurance companiesinsurance companiesinsurance companiesinsurance companies

• Insurance companies have up to 6 months after FEMA Insurance companies have up to 6 months after FEMA Insurance companies have up to 6 months after FEMA Insurance companies have up to 6 months after FEMA

releases the guidance to retool software and implement releases the guidance to retool software and implement releases the guidance to retool software and implement releases the guidance to retool software and implement

the changesthe changesthe changesthe changes

•FEMA will clearly communicate when these FEMA will clearly communicate when these FEMA will clearly communicate when these FEMA will clearly communicate when these

changes are madechanges are madechanges are madechanges are made

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Up to 14 monthsUp to 14 monthsUp to 14 monthsUp to 14 months

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Lisa S. Jones, CFM, CPM, ANFI

(803) 730-8626

lisa@carolinafloodsolutions.comlisa@carolinafloodsolutions.comlisa@carolinafloodsolutions.comlisa@carolinafloodsolutions.com3/27/2014 © Carolina Flood Solutions LLC

www.carolinafloodsolutions.com