Flood Insurance Updates
Private Flood Insurance:
On February 20, 2019, five federal regulatory agencies - the Federal Reserve, FDIC, OCC, Farm Credit and National Credit Union Administrations - published final regulations (link is external) clarifying lender acceptance of private flood insurance. These rules will take effect on July 1.
The final regulations implement Section 239 of the Biggert-Waters Reform Act, which generally requires that lenders accept private flood insurance meeting a strict statutory definition. More specifically, the rules:
- Adopt the same definition of private flood insurance as the statute; this definition has been an ongoing source of confusion, particularly for smaller lenders.
- Provide compliance aid for lenders to determine whether a private policy meets the definition and thus must be accepted in satisfaction of federal flood insurance requirements.
- Clarify that lenders have broad discretion to accept private policies that don’t meet the strict definition if the policy provides sufficient protection of the loan consistent with safety and soundness principles.
NAR has been working as part of a coalition to make it easier for lenders to accept private flood insurance, which often offers better coverage at lower cost than the NFIP. Read our latest regulatory comment letter (link is external). These rules do provide lenders with important clarifications, compliance aid and regulatory certainty. They do not change FEMA or FHA guidelines that generally fail to recognize private flood insurance policies for purposes of federal assistance.
NAR will continue working with Congress and the Administration to clarify any remaining issues of continuous private flood insurance coverage and address these issues as part of NFIP reauthorization and reform legislation.
House Committee Passes Flood Bill:
On June 12, 2019, by a unanimous vote of 59 to 0, the House Financial Services Committee approved HR 3167: the National Flood Insurance Program (NFIP) Reauthorization Act, sending the bill to the U.S. House of Representatives for consideration.
The NFIP Reauthorization Act would extend the program for five years and include significant reforms to strengthen flood mapping, enhance mitigation investments and remove several barriers to private flood insurance options. It easily cleared the first hurdle of the legislative process because it was the product of extensive, bipartisan negotiations between Chairwoman Maxine Waters (D-CA) and Ranking Member Patrick McHenry (R-NC).
NAR supported committee passage because the bill represents a long-term solution to NFIP and a breakthrough of the two-year deadlock that has resulted in 12 short-term extensions and two brief lapses so far. The bill is not only a sensible, bipartisan pathway forward, but also includes numerous NAR-championed provisions and is consistent with long-standing NAR policy principles.
Next, the House of Representatives must vote on the measure but the timing is not yet clear. NAR will urge the House to take up the NFIP Reauthorization Act at the first available opportunity and move the bill to the United States Senate. Currently, NFIP’s flood-insurance-writing authority is next set to expire on September 30, 2019.
Congress Passes VA Loan Bill
The President is expected to sign H.R. 299, the "Blue Water Navy Vietnam Veterans Act." This legislation includes language which will eliminate the cap on the VA home loan guarantee. Veterans, under this legislation, will be able to purchase any home they qualify for using the VA home loan (with zero down payment).
As introduced, the legislation would slightly increase some of the guarantee fees for all veterans using the VA loan program, in order to pay for the healthcare component. NAR opposed this language, and in conjunction with other groups, was able to mitigate the impact of these increases. NAR will continue to work with the VA on implementing the loan limit provision and assuring all veterans have access to the home loan benefit.