Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
The Honorable Michael A. Costello, House Chair
The Honorable Anthony A. Petruccelli, Senate Chair
Joint Committee on Financial Services
State House, Boston
Dear Chairman Costello, Chairman Petruccelli, and Distinguished Committee Members,
On behalf of the cities and towns of the Commonwealth, the Massachusetts Municipal Association appreciates the opportunity to offer testimony in strong support of H. 3783, An Act Relative to Flood Insurance, sponsored by Speaker Robert DeLeo and Attorney General Martha Coakley. We appreciate their leadership on this critically important and urgent issue that impacts homeowners in communities across the state, and we urge the Committee to give this bill a favorable report.
H. 3783 offers a practical set of changes to flood insurance policy law at the state level that would protect homeowners from excessive insurance costs in three ways. First, the bill would prohibit any creditor from requiring a homeowner to purchase flood insurance on the home in an amount that exceeds the value of the mortgage. Second, it would prohibit a creditor from requiring the purchase of flood insurance on the contents of the home. Lastly, it would prohibit a creditor from requiring the purchase of a flood insurance policy with a deductible lower than $5,000.
This bill comes at a time when federal flood insurance policy changes threaten to destabilize communities by making homeownership unaffordable to many. In 2012, Congress passed the Biggert-Waters Flood Insurance Reform Act. The Act reauthorized the National Flood Insurance Program for five years and included measures to close the significant deficit under which the program has historically operated. To increase revenue brought into the program, the law raised premiums for enrolled homeowners so that their payments reflected true risks, and expanded flood plain maps to require more homeowners with properties at risk of flooding to purchase flood insurance. The Act required that the Federal Emergency Management Agency (FEMA) conduct an affordability study prior to the Act’s implementation. While the affordability study was never done, the increased flood insurance rates for homeowners took effect on January 1 of this year. Language in this year’s federal spending bill passed in January then created a one-year stay of implementation for primary residences.
The rate increases brought about by Biggert-Waters are, in many cases, dramatic and unaffordable. In Massachusetts, approximately 60,000 homeowners purchase flood insurance through the National Flood Insurance Program. These homeowners will face an average premium increase of 25% in the first year that the legislation is fully implemented. Other homeowners in Massachusetts have publicly reported astronomical increases, with one homeowner seeing a premium increase from $5,000 to $68,000 annually on a policy valued at $250,000. Homeowners with federally backed mortgages are required to maintain flood insurance, leaving them little recourse when faced with premiums that are impossible to pay. There is significant concern among city and town officials, not just in coastal communities, but also in communities with lakes, ponds, rivers or streams, that flood insurance premium increases of such magnitude will have a destabilizing effect on the fabric of their communities as homeowners default on mortgage payments and leave their properties.
In addition to flood insurance rate increases, Biggert-Waters also directed FEMA to re-draw flood plain maps. This process placed many properties not previously located within the flood plains into the newly mapped areas, requiring them for the first time to purchase flood insurance if they held a federally backed mortgage. A recent study, commissioned by Congressman Keating and undertaken by the University of Massachusetts Dartmouth, indicated that the flood modeling employed by FEMA in the Massachusetts re-mapping process was based on flood patterns specific to the Pacific Ocean, casting doubt on the scientific validity of the newly drawn maps.
In January, the United States Senate passed a bill that would retroactively delay implementation of the Biggert-Waters Act by four years. During that period, FEMA would be required to carry out an affordability study of flood insurance premium increases and come up with a plan to make requisite premium increases affordable for homeowners. FEMA would also be required to revisit the remapping process to ensure that the most accurate flood projection methodology was employed. This bill has not yet come to a vote in the House, but we are very appreciative of the hard work that the Massachusetts congressional delegation is doing to secure passage.
Flood insurance affordability is an issue of community and neighborhood stability. Today, we face a federal landscape that is uncertain, and a looming prospect of increased flood insurance premiums for our residents. The bill before you now offers an excellent and practical opportunity to mitigate the very real financial threat to homeowners posed by increasing flood insurance premiums. We commend Speaker DeLeo and General Coakley for their true leadership on this issue, and urge the committee to give this bill a favorable report. If you have any questions, please do not hesitate to have your staff contact Catherine Rollins of the MMA staff at (617) 426-7272 at any time.
Thank you very much.
Sincerely,
Geoffrey C. Beckwith
Executive Director, MMA
cc: The Honorable Robert DeLeo, Speaker of the House
The Honorable Martha Coakley, Attorney General