On Friday, March 21 President Obama signed the “Homeowner Flood Insurance Affordability Act” into law. This law repeals FEMA’s authority to increase premium rates at time of sale or new flood map, and refunds the excessive premium to those who bought a property before FEMA warned them of the rate increase.
The bill makes the following key changes to the 2012 Biggert-Waters law:
It repeals the property sales trigger requiring that buyers immediately pay the full-risk premium rate at the time of purchase.
It restores “grandfathering” of rates under flood zones when properties were built to code.
It limits future increases to 18 percent annually for most properties built generally after 1975 and 25 percent for the older properties until they are paying full cost for flood insurance.
Finally it refunds any premiums paid by property owners in excess of 18-25 percent increases.
This represents a dramatic departure from earlier versions that would have “paused” increases until FEMA reported on affordability. As enacted, the bill hits the “reset” button back to pre-2012 levels and caps all increases going forward. To make up revenue, a small assessment is added to all NFIP policies until property owners are paying full cost for flood insurance.