Senate Committee Passes Flood Insurance Bill

May 25, 2006

The Senate Banking Committee passed legislation to reform the flood insurance program on May 25.

Committee Chairman Richard Shelby (R-Ala.) said the goal of the reform effort is to “strengthen the program by eliminating subsidies on vacation homes, businesses, and severe repetitive loss properties today, and to lay a foundation for the elimination of all subsidies in the future.”

The Flood Insurance Reform and Modernization Act of 2006 would require flood maps to be updated using stringent standards. Other provisions of the bill would require state-chartered lending institutions to maintain flood insurance coverage for all mortgages located within the 100-year floodplain, would give state and federal banking regulators more enforcement tools by requiring escrow of flood insurance premiums throughout the life of the mortgage; would increase civil monetary penalties regulators may levy against lenders for compliance failures; and would create a mandatory reserve fund to help pay for future losses.