WBA strongly supports a timely reauthorization of the National Flood Insurance Program (NFIP) before it expires at the end of September. Allowing the program to expire, as has occurred in the past, is detrimental to the real estate closing process and can result in delays or even stoppages of real estate closings. Congressman Sean Duffy (R-WI) is taking a lead role in trying to reauthorize this important program while attempting to provide for financial solvency and stability of the Fund well into the future.

The banking industry does have concerns about pending flood-related legislation including H.R. 2874. With regard to H.R. 2874, WBA is concerned about Section 505 which would drop NFIP coverage for any properties with lifetime claims exceeding twice the replacement cost of the property, as well as Section 508 that would more than double penalties for non-compliance by lenders. The current fines and penalties for banks are already excessive with no provision for “minor” or unintentional mistakes made by lenders working hard to comply with the rules. Increasing these civil money penalties yet again on the banking industry could drive some community banks out of the mortgage market altogether. In the FDIC Chicago region, Wisconsin continues to lead the region in civil money penalties assessed by the FDIC. 

WBA also has serious concerns over provisions in the bill removing grandfathering of premium rates, prohibiting NFIP coverage for new construction in the Special Flood Hazard Area, and raising annual surcharges and minimum annual premium rate increases on policyholders.

Among the program’s problems are that the NFIP has a monopoly and private insurers don’t compete in the market, and also that more than half of the program’s costs are commissions paid to private insurance agents who sell policies, and other non-claims costs.

The House Financial Services Committee in June approved five bills as part of a legislative package intended to reauthorize the National Flood Insurance Program. Lawmakers are working to to ensure that the NFIP is renewed prior to its expiration date on September 30.