Schumer & Donovan Discuss Flood Insurance and Biggert-Waters

Today I had the opportunity to talk with Senator Chuck Schumer and Shaun Donovan, U.S. Secretary of Housing and Urban Development, about the outlook for the National Flood Insurance Program (NFIP) and particularly whether they foresee any changes or modifications to the program as currently in effect under the Biggert-Waters Act.  (The primary purpose of their press conference, which also included Rep. Carolyn Maloney,  was to announce additional mortgage forbearance and modification programs for homeowners affected by Sandy.)

The NFIP has been underpriced for many years and, after the large covered losses caused by Hurricane Katrina, it had a program deficit of more than $17 billion in early 2011.  The deficit was addressed in the Biggert-Waters Act, which significantly modified the program.  As The Wave newspaper of Rockaway has been extensively examining (see here and here), those changes in the NFIP, in combination with soon-to-be adopted new FEMA flood maps, will produce dramatically higher flood insurance rates and require many homeowners to purchase flood insurance for the first time.  Such increased insurance rates and coverage requirements will likely have a deep long-term impact on Sandy-damaged areas such as Rockaway.

Senator Schumer accurately pointed out that the increases are to be phased-in over several years.  That’s helpful to homeowners, of course, but it only delays the underlying long term economics; previously underpriced insurance is being brought to actuarial rates and large subsidies are being reduced or eliminated.  Secretary Donovan said that it is the Obama administration’s position that Congress needs to act to “add … a long-term affordability provision” for “lower income and more vulnerable homeowners” to the NFIP.  Any such provisions have yet to be detailed and are, at best, uncertain to occur.  Secretary Donovan also spoke about the importance accurately and promptly preparing the new flood maps.  Senator Schumer added that “we are going to have to examine” affordability.

Here’s the full clip of Senator Schumer and Secretary Donovan discussing the NFIP and Biggert-Waters.  Watch what they had to say.