WASHINGTON (2/14/12)--The National Flood Insurance Program (NFIP) was granted an extension to May 31 just as last year's congressional session ended and Senate leaders now are being urged by two of their colleagues to permanently extend the program, but with modernizations.
Sens. Jon Tester (D-Mont.) and David Vitter (R-La.) urged the Senate majority leader, Harry Reid (D-Nev.), and minority leader, Mitch McConnell (R-Ky.), to schedule debate on a bill passed 406-22 by the House in July and also approved by the Senate Banking Committee with "overwhelming bipartisan support."
"The Senate should take this opportunity to capitalize on the bipartisan effort by the Senate Banking Committee and the House of Representatives to make major improvements to this important program," wrote Tester and Vitter in their Feb. 13 letter. The senators added that they believe passage of a comprehensive NFIP reauthorization bill is "within reach."
The NFIP was established in 1968 and is intended to protect homes and businesses from financial ruin when flooding occurs. The program was last authorized in 2004 to extend to 2008. Since 2008, the program has been extended through a long series of short-term measures.
"In fact, the program expired four times in 2010 resulting in lapses totaling 53 days. It has been estimated that those program lapses resulted in the delay or cancellation of more than 1,400 home closings per day, further damaging our already fragile housing market," the senators wrote.
Both House and Senate bills would extend the flood insurance program for five years. The House bill has a provision, backed by the Credit Union National Association, that would preserve the rights of credit unions to protect their collateral from flood hazards. The provision addresses situations where borrowers have allowed flood insurance to lapse, and clarifies that subsequent flood insurance purchased by a credit union, or other lender, would date back to the date the existing policy lapsed or became insufficient in coverage amount, including any premiums or fees incurred during the 45-day notification period.
The Senate NFIP reform discussion draft, approved by the banking panel, includes a provision--opposed by CUNA--that would require all mortgage lenders to escrow for NFIP premiums. Current law only requires lenders that escrow for taxes and insurance to also escrow for NFIP premiums.
CUNA has warned lawmakers the escrow requirement could drive some small mortgage lenders, including credit unions, out of the mortgage business because there is a significant cost involved with establishing escrow accounts, particularly for community banks, credit unions, and community-based lenders that have small lending volumes.