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House Passes 60-Day Flood Extension Bill

Source: Dow Jones

Posted on 31 May 2012 by Neilson

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Flood Insurance passesHouse lawmakers on Wednesday voted to keep the federal government's flood-insurance program running for another two months, giving Congress more time to finish a long-term overhaul that aims to shore up the program's finances.

The House, without taking a formal vote count, sent President Barack Obama a bill to extend the National Flood Insurance Program for 60 days, following Senate lawmakers who voted to do so last week. If lawmakers hadn't acted, the program would have expired Thursday just as hurricane season starts.

Senate Majority Leader Harry Reid (D., Nev.) has promised to hold a vote in June on a package of long-term changes to the program. Congress has enacted a series of short-term extensions to the program since 2008 and has been unable to complete a full overhaul that would increase premiums that many owners of older homes pay for flood insurance.

Rep. Judy Biggert (R., Ill.) said the prospect of action in the Senate is a "major breakthrough" and noted that House lawmakers have already passed a similar long-term flood-insurance overhaul.

"I remain confident that the House and Senate can reconcile any differences that remain between our respective visions for reform," she said on the House floor.

The flood insurance program was created in 1968 after private insurers were reluctant to sell insurance in flood-prone areas. It has accumulated more than $17 billion in debt, tied to Hurricane Katrina in 2005 and other hurricanes.

Nationally, about 5.6 million homes and businesses have such policies. The flood insurance program had $1.267 trillion in insurance in force as of February.

The policies are sold and claims are managed by private insurers, but the risk is borne by the federal government. Flood insurance is required for government-backed mortgages on properties in flood-prone areas.

At the urging of Sen. Tom Coburn (R., Okla.), the short-term extension included one permanent change for the program: Owners of second homes, third homes and vacation homes will no longer have subsidized coverage phased out. "If you can afford to own property that's in those areas, then you can afford the insurance," Coburn said in an interview.

Had the program been allowed to expire, real estate and insurance industry groups have warned that the fragile housing market could be harmed as many buyers would no longer be able to be approved for loans.

Ben McKay, senior vice president of federal government relations at the Property Casualty Insurers Association of America, said lawmakers appear to be moving toward the long-sought goal of a more complete overhaul.

"This is the closest we've been in a couple of years," he said. But after numerous delays, he said, "you hate to be overly optimistic."