President Signs Flood Insurance Bill

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Explore:  Flood Insurance

On March 21, President Obama signed the Homeowner Flood Insurance Affordability Act of 2013, which includes several provisions impacting previously enacted mandatory flood insurance purchase requirements. The bill, among other things, delays from July 6, 2014 to January 1, 2016, a prior mandate that all flood insurance premiums be escrowed, and excludes from the mandatory escrow requirements (i) home equity lines of credit; (ii) junior or subordinate lien loans when flood insurance is provided for in connection with a superior lien loan secured by the same property; (iii) nonperforming loans; (iv) loans with a term of 12 months or less; (v) business purpose loans; and (vi) loans secured by property that is part of a  condominium, cooperative, or other project development, if the property is covered by flood insurance provided by and paid for, as a common expense, by the condominium association, cooperative, homeowners association, or other applicable group. The bill also mandates that FEMA make available a high-deductible policy for residential properties that increases the maximum loss deductible for damages to covered properties from $5,000 to $10,000. Further, the bill excludes from the mandatory flood insurance purchase requirements detached structures not used as a residence but, in doing so, allows lenders flexibility to require that flood insurance be maintained on such structures.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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