National Flood Insurance Program Regulatory Update

NOTE:           This update was sent to State and Local Association GADs earlier this morning

Provision Eliminating Future Grandfathering in the NFIP Delayed At Least Until 2015

On February 5, 2014, the Federal Emergency Management Agency (FEMA) released guidance released guidance related to flood insurance and grandfathering.  Section 207 of the Biggert-Waters Reform Act (BW12), which passed in 2012,  eliminated the grandfathering provision in the National Flood Insurance Program.   This guidance applies to FEMA’s future plans for grandfathering and not to the skyrocketing rate increases being triggered by a property’s sale which we’re seeing around the county

Grandfathering provides property owners the ability to pay a lower flood insurance rate based on an older map, even if the map and the flood risk changes in the future.  BW12 eliminated grandfathering and required FEMA to increase flood insurance premiums when the maps change, at a rate of 20 percent per year until the property pays the full actuarial rate.  FEMA had recently estimated that rules implementing this provision would be finalized in late 2014.       

This guidance is the result of provisions of the recently passed Consolidated Appropriations Act of 2014 (The Omnibus) which requires FEMA to cease any current planning and development activities to implement this provision through Sept. 30, 2014.   According to FEMA’s statement, they have halted all work related to this provision.  Once Congress restores funding to implement Section 207 of BW12, FEMA estimates it will take an additional 12-18 months to finalize the rulemaking.  NAR will continue to keep you apprised of the latest regulatory and legislative developments related to implementation or reform of BW12.

John DiBiase

Communications Director

Government Affairs

National Association of REALTORS^®