The Flood Insurance Reform and Modernization Act of 2007: A Summary of Key Provisions

The Flood Insurance Reform and Modernization Act of 2007: A Summary of Key Provisions

Order Code RL34052
The Flood Insurance Reform and Modernization
Act of 2007: A Summary of Key Provisions
Updated January 30, 2008
Rawle O. King
Analyst in Industry Economics
Government and Finance Division

The Flood Insurance Reform and Modernization Act of
2007: A Summary of Key Provisions
Summary
In 1968, Congress established the National Flood Insurance Program (NFIP) in
response to severe flooding following a series of hurricanes in 1963 and 1964, and
Hurricane Betsy in 1965. The key policy objectives of the NFIP were threefold: (1)
reduce the nation’s flood risk through floodplain management; (2) improve flood
hazard data and risk assessment through mapping the nation’s floodplains; and (3)
make affordable flood insurance widely available in communities that adopt and
enforce measures to make future construction safer from flooding. Today, the NFIP
reportedly saves taxpayers over $1 billion annually in flood losses that, in the absence
of the program, would otherwise have been paid by taxpayers. Fiscally, the program
had been self-supporting from the mid-1980s until the 2005 hurricanes. These
storms exposed serious weaknesses in the NFIP that Congress is addressing in an
effort to return the program to financial soundness.
In the aftermath of the 2005 hurricanes, the NFIP faces unprecedented financial
and regulatory strains. Hurricanes Katrina, Rita, and Wilma resulted in $19.28 billion
in NFIP-insured losses, as of December 31, 2007. The program had to borrow
$17.535 billion from the U.S. Treasury in order to pay claims and expenses after
Katrina. Those concerned about program challenges in the wake of the 2005 storms
cite the increasing need to borrow from the U.S. Treasury, the need to put the NFIP
on sounder financial footing, substantial premium discounts or cross-subsidies
among classes of policyholders, outdated flood insurance rate maps, allegations of
uneven compliance with mandatory purchase requirements, and questions as to the
performance and efficiency of private insurers operating under the NFIP’s Write
Your Own program.
Policymakers are now examining ways to strengthen the NFIP. On July 19,
2007, Representative Maxine Waters introduced H.R. 3121 to “restore the financial
solvency of the national flood insurance program” and other purposes. Chairman
Barney Frank had introduced H.R. 1682, an earlier version of H.R. 3121, on March
26, 2007. H.R. 3121 would make the program satisfy traditional criteria for actuarial
soundness by phasing out discounted premiums. H.R. 3121 would also: (1) allow the
Federal Emergency Management Agency (FEMA) to increase flood policy rates by
15% a year, up from 10%; (2) increase the program’s borrowing authority to $21.5
billion from $20.8 billion; (3) raise civil penalties on federally regulated lenders who
fail to enforce mandatory purchase of flood insurance for mortgage holders; (4)
increase program participation incentives; (5) add coverage for wind as well as water
damage; and (6) encourage the revisions to flood maps. The bill passed the full
House on September 27, 2007. On November 1, 2007, Senator Christopher Dodd
introduced S. 2284, a flood insurance reform bill designed to increase the amount of
premiums collected reduce the cost of expected claims under the NFIP. S. 2284
would also forgive the program’s outstanding debt to the Treasury. Some
stakeholder groups have expressed concerns about making abrupt changes to the
NFIP, particularly phasing out the subsidized premiums. They point to a need for
flood insurance reform, but say changes should be made in the broader context of
program reauthorization. The NFIP expires on September 30, 2008.

Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Impact of 2005 Hurricanes on the NFIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Summary of H.R. 3121 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Issues Concerning H.R. 3121 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
List of Tables
Appendix 1. Summary of Key Provisions in H.R. 3121 . . . . . . . . . . . . . . . . . . . . 8

The Flood Insurance Reform and
Modernization Act of 2007: A Summary of
Key Provisions
Background
In 1968, Congress established the National Flood Insurance Program (NFIP) in
response to rising flood losses and as an alternative to ad hoc federal disaster
assistance. The NFIP’s insurance operation was self-supporting from the mid-1980s
until the 2005 hurricane season when Hurricanes Katrina, Rita, and Wilma exposed
serious flaws in the program. The 2005 Gulf Coast hurricanes were catastrophic
disasters that required approximately $110 billion in federal disaster relief, including
an estimated $19.28 billion in claims payouts under the NFIP.1 The program now
faces unprecedented financial and regulatory challenges.
Congress is concerned about the financial challenges facing the NFIP. An
important aspect of the financial challenges facing the program involves the
rebuilding of the Gulf Coast region and the adequacy of the NFIP to meet the future
commercial/multifamily real estate mortgage financial needs of all other
communities. Without federal flood insurance, for example, lenders will not be able
to readily sell mortgages in coastal areas and other regions prone to flooding.
Without a reliable and uninterrupted source of affordable flood insurance, mortgage
credit (and home ownership) would be more expensive.
The NFIP’s financial status has forced policymakers to focus on the strengths
and weaknesses of the NFIP in managing and financing the nation’s flood risk.
Those concerned about program weaknesses typically cite the increasing need to
borrow from the U.S. Treasury, the need to put the NFIP on sounder financial
footing, substantial premium cross-subsidies among classes of policyholders,
outdated flood insurance rate maps, allegations of uneven compliance with
mandatory purchase requirements, and questions as to the performance and efficiency
of the Write Your Own program.
Legislative efforts are now underway in Congress to reform the NFIP. On
March 26, 2007, Representative Barney Frank introduced H.R. 1682, the Flood
Insurance Reform and Modernization Act of 2007, in order to “restore the financial
solvency of the national flood insurance program” and other purposes. On July 19,
2007, Representative Maxine Waters introduced H.R. 3121 — a bill that is
1 Testimony of Donald E. Powell, Federal Coordinator, Gulf Coast Rebuilding, U.S.
Department of Homeland Security before the Committee on Senate Homeland Security and
Governmental Affairs, May 24, 2007.

CRS-2
substantially similar to H.R. 1682. H.R. 3121 added two new sections to allow for
the purchase of optional insurance that would cover flood and windstorm losses
(Section 7), and to extend the NFIP five years through September 30, 2013 (Section
27). Section 4 of the bill was modified to reflect minor changes of the phase-in of
actuarial rates beginning on January 1, 2011. On November 1, 2007, Senator Dodd
introduced S. 2284, a flood insurance reform bill designed to increase the amount of
premiums collected and reduce the cost of expected claims. S. 2284 would also
forgive the program’s outstanding debt to the Treasury.
Some stakeholder groups, like mortgage lenders and real estate developers,
point to a need to reform the nation’s flood insurance program, but insist that radical
changes should not be made in reaction to the Katrina disaster. Their main concern
relates to making abrupt changes to the NFIP without full knowledge of potential
unintended consequences, which they maintain may include possible increases in the
cost of affordable rental housing, occupancy costs for businesses, delinquencies and
foreclosures, or reduced property values. Others observe that these issues and other
implications of flood insurance reform should be examined in the 110th Congress as
some Members debate the broader issues surrounding a reauthorization of the NFIP
before program authority expires on September 30, 2008.
Impact of 2005 Hurricanes on the NFIP
The number of claims and severity of flood losses from the 2005 hurricane
season was unprecedented in the history of the NFIP. The Federal Emergency
Management Agency (FEMA) handled 241,000 claims and has paid out
approximately $16.3 billion thus far on flood losses stemming from the 2005
hurricane season. FEMA anticipates that total payouts for the 2005 hurricanes will
be approximately $20.7 billion. As of December 31, 2007, the NFIP had borrowed
$17.535 billion from the Treasury to pay for Hurricane Katrina claims and for the
interest payments due on that borrowing.
In Hurricane Katrina’s aftermath, policymakers have expressed broad concerns
about the financial condition of the NFIP, the potential for future catastrophic losses,
and the program’s ability to meet its financial obligations to the Treasury and to
policyholders.
In an attempt to protect the NFIP’s integrity and ensure that FEMA has the
financial resources to cover its existing commitments, immediately after the 2005
hurricanes, Congress passed and the President signed into law legislation to increase
the NFIP’s borrowing authority to allow the agency to continue to pay flood
insurance claims: first to $3.5 billion on September 20, 2005;2 to $18.5 billion on
November 21, 2005;3 and finally to $20.775 billion on March 23, 2006.4
2 P.L. 109-65; 110 Stat. 1998.
3 P.L. 109-106; 119 Stat. 2288.
4 P.L. 109-208; 120 Stat. 317.

CRS-3
Under current law, FEMA must repay any borrowed funds (with interest) as it
collects premiums. FEMA is unlikely to repay the funds borrowed to pay 2005
hurricane-related claims within the next 10 years.5 Even if FEMA increased flood
insurance rates up to the maximum amount allowed by law (10% per year), the
program would still not have sufficient funds to cover future obligations for
policyholder claims, operating expenses, and interest on debt stemming from the
2005 hurricane season.6 During congressional hearings on June 12, 2007, before the
House Financial Services Committee, Subcommittee on Housing and Community
Opportunity, Edward L. Connor, Deputy Assistant Administrator for Insurance with
FEMA, suggested that Congress should consider the forgiveness of NFIP’s Treasury
borrowing. Supporters of debt-forgiveness point to the avoidance of billions of
dollars in flood losses that would otherwise have been paid by the Treasury and
taxpayers. Today, the NFIP reportedly saves taxpayers over $1 billion annually in
flood losses that, in the absence of the program, would otherwise have been paid by
taxpayers. Debt forgiveness could, however, be judged an explicit subsidy from
general taxpayer funds, with federal budgetary consequences. S. 2284, introduced
by Senator Christopher Dodd in the 110th Congress, would forgive the NFIP debt to
the Treasury.
Recognizing the unprecedented financial and regulatory challenges facing the
NFIP, and the exposure of the federal government to future claims from another
catastrophic loss year, many insurance market analysts and policymakers appear to
agree that this 39-year-old program is in need of an overhaul. Those concerned about
program weaknesses cite:
! increased need to borrow from the U.S. Treasury;
! the need for the program to bring in sufficient premiums to cover the
federal outlays of funds used to pay claims;
! substantial premium cross-subsidies among classes of policyholders;
! outdated flood maps that will form the basis for making decisions
about where and how to rebuild the Gulf Coast, and the need to
modernize them to more accurately reflect flood risk nationwide;
! costly impact of repetitive loss properties;
! allegations of uneven compliance with mandatory flood insurance
purchase requirements when the property is located in federally
designated special flood hazard areas (SFHA);
5 See Letter from Donald B. Marron, Acting Director of Congressional Budget Office, to
Honorable Judd Gregg, Chairman, Committee on the Budget, March 31, 2006, located at
[http://www.cbo.gov/ftpdocs/72xx/doc7233/05-31-NFIPLetterGregg.pdf], visited July 25,
2007.
6 Ibid.

CRS-4
! inadequate management and oversight of private insurance
companies (Write Your Own insurers) that write insurance policies
and adjust claims for the NFIP, vendors that supply services to the
program;
! inadequate education, training, and technical assistance for private
insurance agents and adjusters; and
! federal government long-term exposure to potential changes in
weather-related risk, which could have significant implications for
the nation’s growing fiscal imbalance.
Summary of H.R. 3121
Appendix 1 provides a summary of key provisions of H.R. 3121, the Flood
Insurance Reform and Modernization Act of 2007. This bill is substantially similar
to H.R. 1682, introduced by Chairman Barney Frank in the 110th Congress, and H.R.
4973, introduced by Representative Richard Baker in the 109th Congress. Introduced
by Representative Maxine Waters on July 19, 2007, and cosponsored by Chairman
Frank and other Members, H.R. 3121 would modify the NFIP to bring more
consumers into the system and gradually phase out premium subsidies currently
available for structures built prior to the mapping and implementation of NFIP
floodplain management requirements — the so-called Pre-Flood Insurance Rate
Maps (Pre-FIRM) structures. Pre-FIRM buildings pay heavily discounted rates on
the first $35,000 of their structure’s insured value, and full risk-based premium rates
for the remaining insured value.
H.R. 3121 would also increase the NFIP’s borrowing authority from the U.S.
Treasury from $20.775 billion to $21.5 billion to cover claims and expenses and
increase the dollar limits on the amounts of coverage available for residential
property, from $250,000 (structure) and $100,000 (contents) to $335,000 (structure)
and $135,000 (contents) for any single-family dwelling, and from $500,000 to
$670,000 each for structures and related contents of a nonresidential property. The
bill does not address NFIP debt forgiveness.
H.R. 3121 includes provisions aimed at moving the program to actuarial rates
for certain properties starting on January 1, 2011, a change expected to generate $335
million a year in additional revenue. The bill also would update the nation’s flood
maps and elevation standards. FEMA would be required to phase in actuarially
sound premium rates for commercial and non-primary residences, such as secondary
and vacation homes, and create new categories of optional coverage, such as business
interruption coverage, necessary increases in living expenses, basement
improvements, and replacement cost of contents. FEMA would also be required, for
the first time, to assess and map the nation’s 500-year floodplain and areas that would

CRS-5
be flooded if a dam or levee failed.7 The bill would authorize the appropriation of
$400 million a year over the 2008-2013 period for updating flood maps.8
H.R. 3121 would increase enforcement tools made available to bank regulators
at both the federal and state levels. Lenders would face higher penalties for
noncompliance with the NFIP’s mandatory flood insurance purchase requirement.
The current level of $350 per violation would increase to $2,000 per violation, with
a $1 million cap per institution on penalties in any given year. The $1 million cap,
however, would not apply to institutions for a calendar year if in any three of the last
five calendar years the institution was assessed a penalty of at least $1 million. In
addition, lenders would be required to notify borrowers of requirements that flood
insurance is available to all homeowners, and not just to those in the 100-year
floodplain, as part of the Real Estate Settlement Procedures Act (RESPA)
requirements.
The bill would instruct FEMA to: (1) establish an appeals process; (2)
implement specified minimum training and education standards for insurance agents
selling flood insurance; (3) report to Congress regarding implementation of each
provision of the Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of
2004;9 (4) identify each regulation, order, notice, and other material issued by FEMA
that implements the act; and (5) create a new notice provision to ensure that
individuals who purchased homes in areas of elevated flood risk are made aware of
the risk and given an opportunity to purchase flood insurance.
On July 26, 2007, the House Financial Services Committee approved H.R. 3121.
Section 7 of the bill would, for the first, allow for the purchase of optional insurance
coverage for wind as well as water damage and extend the NFIP five years through
September 30, 2013. Currently, NFIP offers insurance for losses from flood only.
During the mark-up to H.R. 3121, several amendments were offered and
approved. Representative Richard Baker’s amendment would delay coverage for
wind damage until June 30, 2008. Representative Randy Neugebauer’s amendment
would require a FEMA to undertake study on the inclusion of nationally recognized
building codes in flood plain management criteria. Representative Ruben Hinojose’s
amendment would require a study of the economic effects of charging actuarially
based premium rates for pre-firm structures. Representative Ron Klein’s amendment
would update flood plain maps. Representative Emanuel Cleaver’s amendment
would require the completion of the 100-year flood plain map update by 2010 and not
be delayed by work on a 500-year flood plain study. He also had an amendment to
require FEMA to provide more education about flood insurance program.
7 The areas downstream of structural flood control measures heretofore were not considered
in the 100-year floodplain. As a result, residents did not have to comply with the mandatory
purchase requirement under the NFIP.
8 See Archived CRS Report RL33264, FEMA’s Flood Hazard Map Modernization
Initiative, by Wayne A. Morrissey.
9 P.L. 108-264; 118 Stat. 712. For a summary of the law, see, CRS Report RL32972,
Federal Flood Insurance: The Repetitive Loss Problem, by Rawle O. King

CRS-6
The Government Accountability Office (GAO) would be required to conduct
a study on expanding mandatory flood insurance purchase requirements on non-
federal mortgages and properties located in flood zones protected by dams or levees.
In addition, the bill would direct FEMA to report annually to Congress on the
financial status of the NFIP.
Issues Concerning H.R. 3121

H.R. 3121 does include several provisions that may be of concern to private
insurers, the real estate industry, mortgage lenders, and the Bush Administration.
Some property owners may drop or reduce their flood insurance coverage because of
higher premiums. Should this happen, Congress might face the question of
appropriating more funds for disaster relief in the event of another catastrophic flood.
The real estate industry is generally concerned about efforts to expand the
NFIP’s mandatory purchase requirement to include low-risk areas (500-year
floodplains or regions with a 0.2% chance of flooding) located in areas downstream
of dams and levees. Insurers are concerned about provisions that call for an
extension of the deadline for filing for proof-of-loss for up to 180 days following a
disaster, as well as the proposed prohibition of NFIP denial of claims solely for
failing to meet the deadline. Insurers also have expressed concern about applying
changes in the bill retroactively to claims dating from Hurricane Isabel in 2003. They
are also concerned about the broadening of the phase-out of premium subsidies
applicable to primary residences when they are sold.
Mortgage lenders are concerned about the lack of a “safe harbor” for “technical
noncompliance” and “unintentional clerical error.” They have also expressed
concerns about expanding the mandatory purchase requirement to state-chartered
institutions not insured by the Federal Deposit Insurance Corporation (FDIC),
requiring mortgage companies to escrow funds for hazard insurance, and requiring
lending institutions to notify homeowners about residential risks in the 500-year
floodplain.
Critics of expanding the scope of the NFIP to cover wind loss in addition to
flood loss, insist the NFIP’s present $17.5 billion deficit would increase. A July 10,
2007 study by Towers Perrin, on behalf of the American Insurance Association
(AIA), for example, indicated that depending on the extent to which the expanded
NFIP replaces private insurers, the program deficits from wind damages could be
$100 to $200 billion. There is no consensus as to the impact of expanding the NFIP
to include wind coverage. Supporters of the expansion say there will be no federal
subsidies for the wind aspect of the legislation. Also, the home or business owner
in a flood plain would have to purchase flood insurance coverage to obtain the wind
coverage; wind coverage will not be sold separately.
Finally, while the Bush Administration has expressed support for flood
insurance reform legislation, a “Statement of Administration Policy” released on June
27, 2006, raised concerns over provisions in similar legislation introduced in the
109th Congress. H.R. 4973 would have added new lines (types) of coverage,

CRS-7
increased the maximum coverage limits, and required FEMA claims adjusters to
participate in state-sponsored mediation at the request of a state insurance
commissioner.10 According to Administration officials, the requirement for FEMA
claims adjusters to participate in state-sponsored mediation raises constitutional
concerns involving separation of powers between the branches of the federal
government, and between the states and the federal government.11 The issue of
concern is that Congress would be conferring on state officials the authority to
subject agents of the federal executive to the authority of a state government entity.
In light of these concerns, some stakeholder groups would rather fold
consideration of H.R. 3121 into a broader look at the whole program, which is due
for reauthorization in 2008. The real estate industry, for example, wants Congress
to “strike a balance between ensuring the long-term fiscal viability of the NFIP and
avoiding changes that may result in market inequities and housing affordability
problems.”12
Real estate professionals and local public officials have raised concerns about
FEMA’s map modernization and flood elevation standards, new notification
requirements, and the elimination of subsidies for non-residential properties and non-
primary residences. In response to post-Katrina FEMA maps and elevation standards
for building or reconstruction, for example, some local community officials along the
Gulf Coast have complained about the cost of compliance with FEMA’s new flood
mapping and elevation standards. These community officials want waivers on the
new standards, and in the absence of such a waiver might drop out of the NFIP.
In addition, the $30,000 Increased Cost of Compliance (ICC) benefit under the
NFIP, which is used to pay the cost of complying with new land use or construction
ordinances designed to reduce future flood losses, might not be sufficient. Some
consumer advocates want to increase the ICC benefit to $50,000 — at, of course,
higher claims costs to the program. The withdrawal of communities in flood-prone
areas from the NFIP could result in higher uninsured losses and the unintended
consequence of higher federal expenditures for disaster assistance.
10 Executive Office of the President, Office of Management and Budget, “Statement of
Administration Policy: H.R. 4973 — Flood Insurance Reform and Modernization Act of
2006,” [http://www.whitehouse.gov/omb/legislative/sap/109-2/hr4973sap-h.pdf], visited on
June 21, 2007.
11 See Testimony of Edward L. Connor, Deputy Assistant Administrator for Insurance,
Mitigation Directorate, Federal Emergency Management Agency, Department of Homeland
Security, before the House Committee on Financial Services, Subcommittee on Housing and
Community Opportunity, June 12, 2007.
12 See Testimony of Vince Malta on behalf of the National Association of Realtors, before
the House Committee on Financial Services, Subcommittee on Housing and Community
Opportunity, June 12, 2007.

CRS-8
Appendix 1. Summary of Key Provisions in H.R. 3121
(As Passed the House on September 27, 2007)
Provision
H.R. 3121 (Waters)
Title
Flood Insurance Reform and Modernization Act of 2007
Purpose
To protect the integrity of the NFIP by fully funding existing legal
obligations and increasing (1) incentives for homeowners and
communities to participate in the program and (2) awareness of both
flood risks and the quality of information regarding such risks. (Sec.
2(b))
Program Extension
Would reauthorize the NFIP five years through September 30, 2013.
Premium Rates
Phase-In of Actuarial
Would require phase-in of actuarial rates for Pre-FIRM
Rates for Non-Residential
nonresidential (commercial) properties and non-primary residences
Properties and
by increasing the chargeable premium rates 15% once during the 12-
Non-Primary residences
month period that begins January 1, 2011, and once every 12 months
thereafter. Specifies that the aggregate increase in chargeable
premium rates during any 12-month period may not exceed 20% for
non-residential properties and 25% for non-primary residences.
(Sec. 4)
Annual Limitations on
Would increase from 10% to 15% the allowable average annual
Premium Increases
chargeable premium rate increase for each risk category during any
12-month period. (Sec. 11)
Recently Purchased
Would require phased-in actuarial rates on newly purchased pre-
Pre-FIRM Properties
FIRM properties using the same phase-in structure that
nonresidential and non-primary homes would be subject to under the
legislation. (Sec. 4(a)(4))
Purchase Incentives
Study of Extending
Would require the Government Accountability Office (GAO) to
Mandatory Purchase
study the regulatory, financial, and economic feasibility (i.e., costs
Requirement to Properties
of home-ownership, actuarial soundness of program, lender
Located Behind Levees,
compliance) of expanding the standard for mandatory flood
Floodwalls, and Flood
insurance purchase requirement to include properties in areas of
Control Dams
residual risk that would flood if not for the presence of structural
flood control measures such as levees, floodwalls, and dams. (Sec.
3(a)(2))
Mandatory Purchase
Would require the GAO to conduct a study of Pre-FIRM properties,
Requirement for
as well as the impact of amending the Flood Disaster Protection Act
Non-Federal Related
of 1973 to extend NFIP’s mandatory purchase requirements to
Loans
properties in special flood hazard areas (SFHA) that are covered by
a mortgage loan issued by a non-federally regulated lending
institution. (Sec. 3)
Flood Insurance Outreach
Authorizes $50 million for FEMA to make grants to local
Grants
governmental agencies for outreach activities designed to encourage
and facilitate the purchase of flood insurance. Local governments
would use the grants to notify owners and renters about SFHA and
the mandatory purchase requirement, educate such owners and
renters regarding the flood risk and the benefits and costs of
maintaining or acquiring flood insurance. (Sec. 15)

CRS-9
Provision
H.R. 3121 (Waters)
Notification to Tenants of
Would require tenants to be notified of the availability of contents
Availability of Contents
insurance and where to obtain coverage. (Sec. 10)
Insurance
Civil Penalties for
Would increase the civil penalties on federally regulated lending
Lending Institutions
institutions that do not comply with their mandatory purchase of
flood insurance requirement from $350 to $2,000 per violation and
the annual cap from $100,000 to $1,000,000. Would add a “safe
harbor” provision to protect mortgage lenders from “technical
noncompliance” with flood insurance requirements and “unintended
clerical errors” by stating that no penalties may be imposed on
lenders who make good faith efforts to comply with the
requirements. The $1 million cap would not apply to regulated
lending institutions during a calendar year if, in any three of the five
calendar years immediately preceding that calendar year, the
institution was assessed a penalty of $1 million. (Sec. 6)
Notice of Availability of
Would amend Section 5(b) of the Real Estate Settlement Procedures
Flood Insurance and
Act of 1974 (RESPA) to create a new notice provision to ensure that
Escrow of Flood
individuals who purchase homes in areas of elevated flood risk
Insurance Payments in
(whether or not the property is located in a special flood hazard area)
RESPA Good Faith
are made aware of the risk and given an opportunity to purchase
Estimate
flood insurance. (Sec. 20)
GAO Study of Methods to
Would direct GAO to conduct a study of potential methods,
Increase Participation of
practices, and incentives that would increase the degree to which
Low-Income Families in
low-income property owners living in high-risk areas participate in
the NFIP
the NFIP. The study would analyze the feasibility of providing
coverage to low-income families at discounted rates, the amounts of
the discount to make it affordable, and the extent to which low-
income families would be affected by expanding the mandatory
purchase requirements. The report would be submitted not later than
12 months after the date of enactment. (Sec. 19)
Coverage
Maximum Coverage
Would increase coverage limits from $250,000 (structure) and
Limits
$100,000 (contents) to $335,000 (structure) and $135,000
(contents) for any single-family dwelling and from $500,000 to
$670,000 for structures and related contents of a nonresidential
property. (Sec. 8)
Waiting Period for
Would make coverage immediately effective if a policy is purchased
Effective Date of Policies
within 30 days of the purchase or transfer of a property. (Sec. 5)
New Lines of Coverage
Would provide optional coverage for: additional living expenses
following a flood loss when the residence is unfit to live in, basement
improvements (i.e., crawl spaces and other enclosed areas under
buildings), business interruption for commercial property, and full
replacement cost of the contents of properties. New benefits would
be made available only at time of renewal or issuance of a new
contract, and only at actuarial rates. (Sec. 9)

CRS-10
Provision
H.R. 3121 (Waters)
Clarification of
Would require the Administrator of FEMAA to: (1) issue regulations
Replacement Cost
to clarify the applicability of replacement cost coverage for contents
Provisions, Forms, and
in the Standard Flood Insurance Policy; (2) revise any regulations,
Policy Language
forms, notices, guidance, and publications to more clearly describe
the meaning of full cost of repair or replacement under the
replacement cost coverage; and (3) revise the language in flood
insurance policies regarding rating and coverage, such as
classification of buildings, basements, crawl spaces, detached
garages, enclosures below elevated buildings, and replacement cost,
to make flood policy provisions consistent with language used
widely in homeowners policies. (Sec. 24)
Multiple Peril Coverage
Amends Section 1304 of the National Flood Insurance Act of 1968
for Flood and Windstorm
to enable the purchase of optional insurance against both flood and
Losses
windstorm losses. Requires participating communities to adopt
adequate criteria for land management and use. Also amends
Section 1361 of the 1968 Act to authorize the Administrator to
conduct a study and investigation to determine appropriate measures
(laws, regulations, and ordinance relating) that could be adopted in
windstorm-prone areas with respect to windstorm risks, zoning
building codes, building permits, subdivision and other building
restrictions for such areas, and windstorm damage prevention. The
Administrator shall use the results of the study and investigation to
establish comprehensive criteria designed to reduce damages caused
by windstorms. Defines a windstorm as any hurricane, tornado,
cyclone, typhoon, or other wind event. Provision does not take
effect until June 30, 2008. (Sec. 7)
Financial
Borrowing Authority
Would increase the National Flood Insurance Program (NFIP)
Limits
Treasury borrowing authority from $20.775 billion to $21.5 billion.
(Sec. 12(a))
FEMA Report on
Would require the Administrator of FEMA to submit a report to
Repayment of Borrowed
Congress within six months of enactment, that includes a plan for
Funds
repaying borrowed funds. (Sec. 12(b))
Annual Report on
Would require FEMA to submit an annual report to Congress on the
Financial Status of
financial status of the program. The report would include
Program
information on the current and projected levels of claims, premium
receipts, expenses, and borrowing under the program. (Sec. 14(c))
Authorization of
Would authorize to be appropriated such sums of money as may be
Additional FEMA Staff
necessary to hire additional staff to carry out the responsibilities of
the Director pursuant to this act. (Sec. 25)
Mitigation
Flood Mitigation
Would eliminate the limitation on aggregate amount of assistance.
Assistance (FMA)
Allows for the use of Flood Mitigation Assistance funds to demolish
Program
and rebuild damaged property. (Sec. 18)
Mitigation Grants for
Would direct FEMA to provide grants to owners of repetitive loss
Individual Repetitive
properties in communities that do not participate in the NFIP. (These
Claims Properties
communities might not participate because they have withdrawn
from the program or the community cannot meet the federal
requirements for qualifying for FEMA funding.)
(Sec. 16)

CRS-11
Provision
H.R. 3121 (Waters)
Extension of Pilot
Extends the pilot program for mitigation of severe repetitive loss
Program for Mitigation of
properties through September 30, 2012. (Sec. 17)
Severe Repetitive Loss
Properties
Claims
FEMA Participation in
Would permit state insurance commissioners to submit a request to
State Disaster Claims
the Director of FEMA to have the agency participate in state-
Mediation Programs
sponsored non-binding mediation of catastrophe-related insurance
claims that may result in flood damage claims under the NFIP.
(Sec. 13(c))
Would require the following: (1) all statements made and documents
produced during the mediation shall be deemed privileged and
confidential settlement negotiations made in anticipation of
litigation; (2) participation in the mediation shall not affect or
expand the liability or rights or obligations of any party in contract;
(3) retention of exclusive jurisdiction in the federal courts; also
provides that FEMA not be required to pay additional mediation
fees. (Sec. 2(d))
Reiteration of FEMA
Under the Bunning-Bereuter-Blumenauer Flood Insurance Reform
Responsibility Under the
Act of 2004 (P.L. 108-264; 118 Stat. 712), would direct FEMA to
2004 Reform Act
establish an appeals process that policyholders can use to resolve
decisions of the Administrator relating to claims, proofs of loss, and
loss estimates. (Sec. 21(a))
Would require the Administrator to continue to work with the
insurance industry, state insurance regulators, and other interested
parties to implement previously developed minimum training and
education standards for all insurance agents who sell flood insurance
policies. (Sec. 21(b))
Would require the Administrator to submit a report to Congress
within six months describing FEMA’s implementation of provisions
in the Reform Act of 2004. (Sec. 21(c))
Mapping
Reestablishment of
Would reestablish the Technical Mapping Advisory Council to
Technical Mapping
provide direction and assistance to the Administrator of FEMA with
Advisory Council
managing the flood map modernization project and submit an annual
report to the Administrator outlining their activities and
recommendations. The Council would include representatives from
the Army Corps of Engineers, local and regional flood and
stormwater agencies, state geographic information coordinators, and
flood insurance servicing companies. (Sec. 22(b))
Modernization of Flood
Would require the Administrator in consultation with the Technical
Maps and Elevation
Mapping Advisory Council to establish an ongoing program to
Standards
review, update, and maintain flood insurance rate maps. Each map
shall include a depiction of the 500-year floodplain, as well as
“residual risk” areas behind levees and flood control dams. Updated
flood maps would include relevant information on coastal inundation
provided by Army Corps of Engineers, storm surge modeling by the
National Oceanic and Atmospheric Administration (NOAA), and
stream flows, watershed characteristics, and topography provided by
the U.S. Geological Survey (USGS). (Sec. 22(a))

CRS-12
Provision
H.R. 3121 (Waters)
Would require the Administrator to: (1) establish standards to ensure
the adequacy and consistency of maps and methods of data
collection and analysis; (2) give priority to updating and maintenance
of maps of coastal areas affected by Hurricanes Katrina and Rita in
order to provide guidance with respect to hurricane recovery efforts;
and (3) submit a report to Congress that describes the flood map
modernization activities by June 30 of each year.
Would require FEMA, when practical, to utilize emerging weather
forecasting technologies in flood map evaluation and identification
of potential risk areas.
After each flood map is updated, FEMA shall, in consultation with
the chief executive officer of each community affected, conduct a
program to educate the community about the updated flood insurance
maps.
Would authorize the appropriation of $400 million for each of fiscal
years 2008 through 2013. (Sec. 22(a)(7))
Post-Disaster Flood
Would allow the Administrator to issue interim flood elevation
Elevation Determinations
requirements for any areas affected by flood-related disaster. Interim
elevation determinations would take effect immediately upon
issuance and may remain in effect until the Administrator
established new flood elevations for such area. (Sec 22(c))
Notification of Map
Would require the Director of FEMA to notify the chief executive
Changes and Appeal of
officer of local communities about their right to appeal projected
Map Changes and
base flood elevation determinations, and the contact information of
Revised Flood Elevation
the person who handles appeals at FEMA. (Sec. 23)

Would require that when FEMA proposes a change in flood
elevation, the Administrator must notify the chief executive officer
of each community affected by the proposed elevation. The
Administrator would also be required to publish a notice in the
Federal Register and local newspapers, notifying each owner of real
property affected by the proposed elevation the status of such
property with respect to flood zone and flood insurance requirements
under the act, and the process to appeal a flood elevation
determination. (Sec. 23)
Source: Congressional Research Service.
Note: A The Post Katrina Emergency Management Reform Act (Section 602, P.L. 109-295; 120 Stat.
1394) replaced the position of FEMA Director with that of FEMA Administrator. H.R. 1682 refers
to the former office title. This report refers to the title cited in the legislation.