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Under new regulations promulgated by the state Division of Banks, homeowners will only be required to purchase flood insurance on the remaining value of their mortgage and not on the full replacement value of their home.
The regulations, set to take effect on Sept. 11, will offer homeowners who occupy their residences the chance to save money on flood insurance if they decide to purchase insurance only on the remaining value of their mortgages. Homeowners may still choose to purchase flood insurance on the full replacement value of their homes.
The regulations implement state legislation enacted last year, co-sponsored by House Speaker Robert DeLeo and then-Attorney General Martha Coakley, that prohibits any creditor from requiring a homeowner to purchase flood insurance in an amount exceeding the value of his or her mortgage. It also prohibits a creditor from requiring flood insurance on the contents of a home or requiring a deductible lower than $5,000.
The regulations reflect a change from the prior practice of the Division of Banks. Previously, homeowners with mortgages originating before November 2014 were not allowed to purchase flood insurance only on the remaining value of their mortgage.
The MMA was among those urging the Division of Banks to allow all mortgage holders to purchase flood insurance only on the remaining value of their mortgage.
In a letter to the Division of Banks last year, MMA Executive Director Geoff Beckwith wrote: “In Massachusetts, approximately 60,000 homeowners purchase flood insurance through the National Flood Insurance Program. … Flood insurance premium increases of significant magnitude will have a destabilizing effect on the fabric of all these communities. The Division of Banks has the opportunity to protect municipalities by creating final regulations that offer the law’s protections to all homeowners, as intended by lawmakers.”
The state legislation was filed in response to the federal Biggert-Waters Flood Insurance Reform Act of 2012, which was intended to make the National Flood Insurance Program more sustainable. The federal law, however, forced many homeowner insurance rates to increase dramatically in order to more accurately reflect the true risk of a flood event.
For more information on the new regulations, including frequently asked questions, visit the Division of Banks website (www.mass.gov/ocabr/banking-and-finance/laws-and-regulations/dob-regulations/historical-info/209-cmr-57-00-flood-insurance-final-amendments.html).