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Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release April 1, 2003 #03-16
E-mail: [email protected]

AMERICA’S COMMUNITY BANKERS URGES CONGRESS TO REAUTHORIZE NATIONAL FLOOD INSURANCE PROGRAM

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WASHINGTON, D.C. — America’s Community Bankers urged Congress today to reauthorize the National Flood Insurance Program, support a strategy to reduce the cost to taxpayers of repetitive losses, and help protect mortgage lenders from losses on loans outstanding on flood-prone properties.

Testifying on behalf of America’s Community Bankers at a hearing of the House Housing Subcommittee, Frederick Willetts III said: “The NFIP is important to every mortgage lender in the United States whose lending territory includes properties in areas of high flood risk.” Willetts is chairman, president and CEO, Cooperative Bank, Wilmington, N.C., which is located in a coastal area.

The NFIP’s authorization expired on Dec. 31, 2002, and was not reauthorized until Jan. 13, 2003. During the two-week lapse in reauthorization, an estimated 400,000 households were prevented from obtaining or maintaining insurance. The program is currently authorized through the end of 2003. To avoid another shut down, Willetts recommended a multi-year extension of at least four or five years. H.R. 253 by Rep. Doug Bereuter (R-Neb.) and H.R. 670 by Rep. Richard Baker (R-La.) would reauthorize the NFIP through 2007 and provide additional funding for loss mitigation.

Under the NFIP, financial institutions are prohibited from originating or refinancing loans secured by property in Special Flood Hazard Areas unless covered by flood insurance. The NFIP is the primary source of affordable flood insurance. The program is administered by the Federal Emergency Management Agency.

Each bill would put some responsibility on property owners to bear the cost of not accepting the government’s buyout or mitigation offers. Willetts said ACB supports increased premiums to help stem the costs to taxpayers associated with repetitive losses to properties. “However, we think the bills should take into account circumstances that might unduly imperil the homeowner, the lender or other affected parties,” he said.

Willetts said the legislation should require the formal notification of lenders before flood insurance premiums are increased and at a time when intervention might still be possible. He said prospective purchasers and mortgage lenders should also be made aware of a proposed premium increase. Lenders deserve assurances that any loan secured by a property targeted for demolition will be repaid with the proceeds of the buyout, he said.

Willetts said ACB supports the exemptions in H.R. 670 under which homeowners would not be required to accept a buyout offer under the mitigation program. These include instances where a homeowner would be unable to purchase a replacement structure; flood damage was caused by a third party; the property was historically significant; or the property was not located in a Special Flood Hazard Area at the time of purchase.

Willetts said consideration should also be given to an exemption for purchase offers that are insufficient to pay off the outstanding balance on mortgages secured by the flood-prone properties. “Homeowners should not have their flood insurance canceled, premiums significantly raised, or be made ineligible for disaster relief because the property value has declined significantly since it was purchased,” he said.

Willetts also said it is essential for Congress to clarify that flood insurance will not be denied to properties in broad geographic areas that might experience a large number of losses as an aberration. “For instance, the region in which I live, coastal Carolina, has recently experienced an unusually large number of hurricanes, one of which resulted in a 500-year flood,” said Willetts. “It would not be practicable for FEMA to respond to such circumstances by seeking extensive mitigation or relocation.”

Testimony

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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