Just read, and re-read, the Grimm‐Waters‐Richmond Homeowner Flood Insurance Affordability Act and a summary prepared by the Congressional committee staff. It leaves a few questions. Here is the summary of what it does, then I will point out the questions.
Delays the implementation of rate increases on the following three types of properties until FEMA meets two requirements: 1) completes the affordability study mandated by the Biggert‐Waters Flood Insurance Reform Act of 2012, proposes a draft affordability framework for Congressional review, and Congress has a chance to give FEMA affordability authority; and 2) the FEMA Administrator certifies that the agency has implemented a flood mapping approach that utilizes sound scientific and engineering methodologies to determine varying levels of flood risk in all areas participating in the National Flood Insurance Program.:
1. All homes and businesses that are currently “grandfathered.” These are properties that were built to code and later remapped into a higher risk area. Prior to Biggert‐Waters, these policyholders were not penalized for relying on inaccurate FEMA flood maps.
2. All properties that purchased a new policy after July 6, 2012, before they were legally required to purchase insurance.
3. All properties sold after July 6, 2012. New homeowners and business owners will continue to receive the same treatment as the previous owner unless they trigger another provision in Biggert‐Waters such as Severe Repetitive Loss, non‐primary residence, substantial damage, etc.
The act will delay rate increases across a broad spectrum of properties until the affordability analysis and a review of the new flood maps are completed. It does not delay the adoption of the new maps.
Items 1 and 3 are the curious ones, especially in their differences. Item 1 reads as protecting all currently grandfathered homes and businesses. I am not sure that “current” grandfathering is supposed to extend to non-primary residences (residences resided in 80% of the year as defined by FEMA), but I am aware of a number of such grandfather protections existing in town. So, based upon the summary, and I defer to others to try to determine whether they can extract the exact passage in the legislation (here) all grandfathered properties in the Town of Dennis will remain grandfathered. This is different from the Senate Act which specifically mentioned primary residence in its version. The summaries I have read of the Senate Act have also not mentioned grandfather protections for businesses.
Item 2, protects flood insurance rates on flood insurance policies bought subsequent to the passage of Biggerts-Waters for properties not currently in the flood zone. THIS IS VERY IMPORTANT! If you are identified on the pending maps, as being added to a flood zone, buy your flood insurance before July of 2014!
Item 3, protects the transfer of grandfathered flood insurance rates at the time of property resale. This will assist in resale of properties during the re-evaluation of the flood insurance risk based program. But only to an extent. First, the insurance companies, sellers and buyers all will be operating with the specter of a potentially significant flood insurance rate increase still looming four years from now. This unknown has already started to affect resales, and has the possibility of being a drag of property resale values until it is resolved. Second, transfer of properties to be used as non-primary residences will see an increase to full actuarial risk – a dollar amount we still do not have enough information on.
I am not sure how item 3 will affect our waterfront multi-family condominium properties. As I read it (Item 1) would extend grandfather protections to a property like the Garlands which I have been working with on flood insurance issues recently. Item 3 would suggest resale would trigger a rate increase. However, since this is a multi-family structure, does the resale of a single unit trigger a rate increase for the entire structure?
This act appears to have the support of the majority of the House of Representatives, still no guarantee it will ever make it to the floor for consideration. If it passes, there will be a need to resolve differences between what the Senate has already passed and this legislation.