Menendez Calls Again for Passage of Flood Insurance Affordability Bill

Menendez Calls Again for Passage of Flood Insurance Affordability Bill

Senate Overwhelmingly Votes (86-13) to Begin Debate

WASHINGTON, DC - U.S. Senator Robert Menendez tonight urged the Senate to pass his bi-partisan Homeowner Flood Insurance Affordability Act. Immediately following his remarks, the Senate overwhelmingly voted to invoke cloture on the bill (86-13) - clearing a procedural hurdle necessary to open up full debate and moving the measure a step forward.

His remarks as prepared for delivery follow:

"I rise in support of the Homeowner Flood Insurance Affordability Act - a bipartisan, bicameral piece of legislation to ensure families will be able to afford flood insurance so they can stay in their homes, businesses can stay open and property values won't plummet. This broadly bipartisan legislation will stop the most onerous and damaging rate increases while minimizing the impact on the National Flood Insurance Program's solvency.

"I want to thank all of our cosponsors along with: The National Association of Homebuilders, The National Association of Realtors, The American Bankers Association, The Independent Community Bankers of America, The Independent Insurance Agents and Brokers of America, The National Association of Counties, The National League of Cities and GNO Inc. who have all endorsed our bill.

"I especially want to thank my lead Republican cosponsor, Senator Isakson. I've had the pleasure to work with Senator Isakson on a number of issues, and have come to respect his honesty and desire to come to together and get things done regardless of the issue.

"I also want to thank Senator Landrieu who has been focused like a hawk on this issue for years now. Senator Landrieu is without a doubt the Senate's preeminent expert on disaster recovery and flooding issues. The people of Louisiana are fortunate to have such a tireless champion, who has taken the time and effort to understand every aspect of flooding and disaster recovery.

"I saw that expertise first hand when Senator Landrieu joined me in New Jersey after Sandy struck, and pledged to stand with New Jersey and for the relief we needed. I cannot thank her enough for everything she did for the people of New Jersey then -- and I'm proud to stand shoulder to shoulder with her again today.

"M. President, when Sandy struck New Jersey, over two million households were without power, 346,000 homes were damaged or lay in ruins and most tragically of all, 37fellow New Jerseyans lost their lives.[1] But true to our state's motto, we were Jersey tough. People who lost their homes were knocked down but not out. They got up, dusted themselves off and started the long process of rebuilding.

"But just as they were getting started, they got hit by another disaster - this time a manmade one that took the form of drastic flood insurance premium hikes that threatened to finish the job that Sandy started.

"I started receiving letters, first dozens, then hundreds, then thousands of people pleading to me for help. They wrote in desperation that their insurance premium was about to go from $1,000 a year to an incredible $10,000. They told me, after exhausting all of their savings on repairing or rebuilding their home, they simply had no more to spare -- no more left.

"They were being hit by what I've come to call a triple whammy. First they got hit by the worst natural disaster in our state's history. Then they were faced with drastically elevated premiums mandated by Biggert-Waters. And finally they had to contend with a fatally flawed mapping process that further exacerbated the drastic rate increases.

"But, while Sandy made New Jersey especially vulnerable to the rate hikes required under Biggert-Waters, make no mistake about it, this is not just a New Jersey or a New York or even a coastal issue. The reason this bill has such broad support across both the ideological and geographical spectrum, is because flood insurance isn't just a coastal issue or a northeast issue - it's an issue that affects the entire country.

"The fact remains that 55 percent of Americans live within 50 mile of the coast. And National Flood Insurance Program insures more than 5.5 million properties across all 50 states - and every state in the nation will see premiums on some of those properties increase as a result of Biggert-Waters.

"People who played by the rules and built to code will suddenly find they are no longer in compliance and will be faced with a difficult decision -- spend upwards of $100,000 to elevate your home the 3 or 4 or 5 or more feet from its current level -- or see your annual insurance premium spike from $1,000 to $20,000 over the next 5 years.

"Not all of these increases will be so drastic, but the ones that are will act as a de facto eviction notice for homeowners who have lived in their homes and played by the rules their entire lives. If they try to sell their homes, prospective buyers will balk after learning of the high premium that comes with it, leaving the owner no choice but to sell at a steep discount. This will drive down property values as the housing market is still struggling to recover. We all know that declining property values have a domino effect, causing entire neighborhoods to decline in value, which in turn hurts the broader economy.

"And what's most alarming is the fact that FEMA doesn't even know the size or scope of this problem. They were supposed to complete a study into the affordability of rate increases mandated by Biggert-Waters by last April, but have failed to do it. The main reason for the delay is they simply don't know what the new rates are going to look like. They don't know how many families will see rates double or triple or many times more, so they can't even guess how these hikes will impact affordability.

"Think about that for a second. We're making dramatic changes in policy, which could impact more than 5.5 million policyholders and have ripple effects through the housing market and our entire economy before we even know the extent of these changes or their impact. This is simply unacceptable.

"In addition to the impact on families, the housing market, and the economy, drastic rate increases could actually have the perverse effect of undermining the solvency of the program. It could end up costing taxpayers more in disaster assistance payments by pricing homeowners out of insurance.

"Recent reports suggest that only around 18 percent of properties in flood zones participate in the program.[2] And one study has shown that for every 10 percent increase in premiums, program participation decreases by approximately 2.9 percent.[3] If rates are raised too high too quickly, people will simply opt to drop their insurance, decreasing participation and the risk pool the NFIP draws on.

"The sharper the increases, the higher the proportion of dropouts. As with any insurance fund - the smaller the risk pool - the greater the risk. So by pricing people out of the flood insurance program, increasing rates could have the unintended consequences of actually making the program less solvent. Reduced program participation would also increase the amount taxpayers are on-the-hook-for in disaster assistance payments. Since FEMA grants, SBA loans, and other disaster assistance are reserved for unmet needs, more uninsured homeowners translates into more disaster assistance payouts.

"And -- as FEMA Administrator Fugate testified before the Banking Committee -- building code requirements and other mitigation assistance under the NFIP saves American taxpayers $1.6 billion every year in reduced disaster response and recovery costs. We should be incentivizing people to purchase insurance so they have skin in the game and they will be motivated to take proactive mitigation measures - not pricing them out of insurance so they're forced to rely on taxpayer-funded disaster assistance.

"Not only are we blind to the extent of these rate hikes and the affect they'll have on program participation and the overall budget, we are also allowing what I believe to be a highly questionable mapping process to justify them.

"My experience with FEMA's map updates has led me to have serious doubts about the process and the accuracy of their results. In December 2012, FEMA released Advisory Base Flood Elevation maps or ABFEs for ten counties in New Jersey. These ABFEs showed a dramatic expansion of what are known as "V Zones", which are high-risk flood zones that require houses to undergo special retrofitting that is often prohibitively expensive.

"For the thousands of families that were now in this dreaded V Zone, the notification they received might as well have been an eviction notice, because they were never going to be able to afford the retrofitting and without it, they couldn't afford their premiums.

"To be fair, FEMA did say these ABFEs were conservative and subject to change in the next phase of the updates, but they maintained the changes would be minimal and the zones would remain larger the same.

"After challenging the accuracy of these maps and pushing FEMA to expedite their review process, they finally released a new iteration that showed as much as an 80 percent decline in the V Zone area in some counties. This was not a small mistake or rounding error, it was a fatally flawed process that resulted in needless anxiety and frustration for thousands of homeowners only months out from Sandy.

"While this is bad enough, imagine how worse the consequences would have been if premium rates were increased to reflect these inaccurate ABFEs. Families would be forced out of their homes and homeowners would lose the most valuable asset they have, something they've worked their whole life for, all because of inaccurate maps.

"While there's no question we need to put the flood insurance program on a more solvent trajectory, we first need to understand the scope of these changes and be sure the mapping process used to set these rates is accurate. We need to understand the impact that these dramatic changes in Biggert-Waters will have on the housing market before it's too late.

"Unfortunately, Biggert-Waters forces changes that are far too large - far too fast. It requires FEMA to increase rates dramatically, even before FEMA knows the scope of these changes or how they will impact program participation. That's why our bill would impose a moratorium on the phase-out of subsidies and grandfathers included in Biggert-Waters for most primary residences until FEMA completes the affordability study that was mandated in Biggert-Waters and proposes a regulatory framework to address the issues found in the study.

"It would also require FEMA to certify in writing that it has implemented a flood mapping approach that utilizes sound scientific and engineering methodologies before certain rate reforms are implemented. For any property sales that occur during this period, the homebuyer would continue to receive the same treatment as the previous owner of the property unless they trigger another provision in Biggert-Waters not covered by my bill. For prospective homebuyers, the certainty that they will not see their rate dramatically increase simply because they purchased a home is critically important to maintaining property values.

"Also, this new legislation would give FEMA more flexibility to complete the affordability study. It would reimburse qualifying homeowners for successful appeals of erroneous flood map determinations. It would give communities fair credit for locally-funded flood protection systems. It would continue the fair treatment afforded to communities with flood-proof basement exemptions and it would provide for a FEMA ombudsman to advocate-for and provide information-to policyholders. And it would streamline the registration process for insurance brokers and agents so they can better provide timely services to policyholders after a disaster.

"Just as important as what this bill would do, it's also important to note what this bill would NOT do. This legislation would NOT stop the phase out of taxpayer-funded subsidies for vacation homes and homes that have been substantially damaged. It would NOT stop the phase out of taxpayer-funded subsidies for properties that have been repetitively flooded, including the 1% riskiest properties that account for over one-third of all claims. It would NOT encourage new construction in environmentally sensitive or flood prone areas. And it would NOT stop most of the important reforms included in Biggert-Waters.

"This legislation simply provides temporary relief to a targeted group of property owners who played by the rules and are now poised to see their most valuable asset become worthless, all through no fault of their own.

"This bill doesn't include everything I wanted and I know there were many other ideas that other cosponsors wanted to include. But, in order to reach a true consensus, we limited the provisions in this bill to those that had broad bipartisan support. That's why we're here today -Democrats and Republicans - asking for your support on this vital piece of legislation.

"We've tried to reach a delicate balance with this bill that recognizes the need to improve solvency and phase out certain subsidies, but tries to do so without discouraging program participation and thus undermining solvency and fiscal responsibility.

"M. President, this issue isn't just about insurance rate tables and actuarial risk rates - fundamentally it's all about people. People who played by the rules their whole lives and are now facing a life altering event they never could have prepared or planned for.

"This is an existential issue not just for the Jersey Shore, but for our entire state. If Biggert-Waters is allowed to be implemented as written, we will see property values drop, middle class families forced from their homes, and our economy suffer.

"The Homeowner Flood Insurance Affordability Act is a broadly bipartisan, carefully crafted, tightly targeted approach to restore the solvency of the NFIP, while fulfilling the original intent of the program: to make flood insurance affordable and accessible. We need to pass this bill and we need to pass it now. I urge my colleagues to vote YES on cloture so we can provide relief to families before it's too late."


[1] Osterman, Cynthia (November 16, 2012). "Factbox: Storm Sandy blamed for at least 132 deaths in U.S., Canada". Reuters.