Worried about new federal flood insurance rules sparking another foreclosure crisis in Massachusetts, House Speaker Robert DeLeo and Attorney General Martha Coakley on Wednesday partnered to file legislation limiting the amount of insurance homeowners in the flood zone must purchase.
Though the Winthrop Democrat said the state-level action could blunt the impact of new federal flood insurance regulations, DeLeo said Congress must still act to further protect the expanded group of coastal residents and businesses and those living near lakes and rivers who are now required to purchase more comprehensive and costly insurance.
“People aren’t going to be able to pay their insurance, and as a result of that they’re going to lose their home unless we can convince our friends in Washington, which right now I guess they’re a little bit involved with a couple other issues, but they’re really going to have to get on the ball and address this,” DeLeo told reporters after meeting with House Democrats.
The bill filed by DeLeo and Coakley would limit the amount of flood coverage a homeowner or business must purchase to the value of the mortgage on the property, instead of the replacement value of the home. Creditors would also be prohibited from requiring coverage for contents of the home, or including a deductible less than $5,000.
Taking one of the only steps a state can to limit the amount of coverage required under federal guidelines, the Beacon Hill leaders hope to lower premiums for impacted homeowners, while retaining the option for consumers to purchase more coverage if they desire.
“These new flood insurance changes are going to devastate many families and businesses in our coastal communities,” Coakley said in a statement. “We continue to urge the federal government to delay implementing these changes until they’ve followed all the steps required by law.”
Coakley said she did not expect insurers to have a “huge complaint” with the legislation.
The Biggert-Waters Flood Insurance Reform Act of 2012 required the Federal Emergency Management Agency to redraw national flood maps, and eliminated various subsidies in the National Flood Insurance Program to ensure sustainability.
Critics, however, say the new maps have captured large swaths of real estate at little to no risk of flooding, forcing larger numbers of property owners to purchase insurance. New rules governing the required height of buildings and other structural requirements for properties in the flood zone have also driven up the price tags on policies.
Rep. James Cantwell, a Marshfield Democrat, recently provided the News Service with a copy of an insurance bill for a Scituate homeowner that spiked up to $68,000 under the new program. He called the new FEMA flood maps “ridiculous.”
The homeowner, Peg Sullivan, told the News Service that she previously paid a $1,300 premium for the same coverage.
“It’s hurting our Massachusetts builders. It’s hurting our Massachusetts realtors. Right now, all up and down the coast, we have essentially people are being frozen out. They can’t sell their homes, and people aren’t buying because there’s so much uncertainty about what their rates are going to be for their flood insurance. The speaker taking swift action right now is so warranted and so helpful and I’m thrilled to be joining with him,” Cantwell said.
Sens. Elizabeth Warren and Edward Markey and the state’s entire Congressional delegation recently sent a letter to House and Senate leadership urging a delay in the Biggert-Waters reforms.
Cantwell said budget cuts limited FEMA's ability to review its surveys, and the government shutdown, which began Oct. 1, has placed on furlough the governmental affairs person at FEMA whom he speaks to about constituents' concerns. Scituate and Marshfield hired their own consultant to contest the FEMA maps.
Cantwell, whose bill (H 865) had a hearing last month calling on the Division of Insurance to regularly investigate the National Flood Insurance Program, said he’s “cautiously optimistic” that DeLeo’s bill can be heard and brought forward for a vote before the end of the year.
Though he made clear the “ultimate answer” must still come from Washington, DeLeo said he hopes that by tying the insurance requirements in Massachusetts to the value of a mortgage, property owners will fare “significantly better” than they would under the federal guidelines.
“We’re truly going to see people losing their homes, not from floods, but from flood insurance,” DeLeo said.