[Congressional Record Volume 140, Number 35 (Thursday, March 24, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 24, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
         FLOOD INSURANCE RISK MANAGEMENT ACT OF 1994 INTRODUCED

                                 ______


                            HON. JIM SAXTON

                             of new jersey

                    in the house of representatives

                        Thursday, March 24, 1994

  Mr. SAXTON. Mr. Speaker, I rise to join Mr. Hughes in introducing the 
Flood Insurance Risk Management Act of 1994.
  We on the New Jersey coast have seen a rise in the frequency of 
nor'easters--devastating storms that batter our coastal towns. Our 
concern for our constituents who live and vacation on the coast has 
brought us to the floor today.
  Since 1968, the National Flood Insurance Program has provided 
federally backed flood insurance to encourage communities to enact and 
enforce floodplain regulations.
  The program has been largely successful in encouraging communities to 
change local building codes to eliminate risky development. In 
addition, the program has lessened taxpayer involvement from bailing 
out communities after storms because NFIP participants pay into the 
fund by which they are covered.
  The bill we are introducing today will improve two areas in the NFIP 
that have been criticized as ineffective.
  The first problem is lack of participation which may lead to solvency 
problems for the fund. This bill encourages participation in a number 
of ways--
  First, it requires financial institutions and Federal agency lenders 
that have mortgage escrow accounts to collect flood insurance premiums 
from borrowers--this protects their investment.
  Second, it authorizes lenders to purchase flood insurance for 
borrowers who live in special flood hazard areas but have not purchased 
flood insurance--again, this protects the bank as well as the borrower.
  Third, this bill establishes a Community Premium-Pooling Program to 
authorize the FEMA to enter into agreements to allow all premiums for a 
community to be paid by an appropriate public body or agency.
  This enables a community to cover not only homes in special flood 
hazard areas with mortgages, but also those without. In the wake of our 
last nor'easter, FEMA found that 60 percent of those homes damaged by 
the storm were those on which no mortgages were held and therefore were 
not targeted or covered by the NFIP. This bill will increase 
participation by including that 60 percent in the program, increasing 
the number of ratepayers and spreading out the risk.
  The second problem that our constituents have requested the program 
address is mitigation.
  There are two approaches that are taken in the bill to help 
homeowners fulfill mitigation requirements--such as flood-proofing 
their homes.
  The bill establishes a revolving loan fund in the Treasury to make 
loans to carry out flood damage or erosion mitigation activities to 
those communities or individuals participating in the NFIP. The loan is 
fixed at a 3 percent interest rate. This fund is financed by a one-time 
surcharge, as is the additional coverage of mitigation insurance, a 
concept the FEMA supports. It authorizes the Federal Insurance 
Administration (FIA) to allow claims for the increased cost of 
compliance resulting from flood damage.
  Finally, this bill defines and limits claims on repetitive loss 
structures and requires actuarial rates be charged on such structures. 
It establishes a program placing increasing penalties on repeated 
claims, beginning after the second claim of $5,000 or more.
  This bill is the result of countless hours Congressman Hughes and I 
have spent consulting our constituents who participate in the National 
Flood Insurance Program. This includes lenders, real estate agents, 
coastal community representatives, local Government officials and 
Federal agencies which administer the program. It answers their many 
concerns about the program and we hope for your support in improving 
this important safeguard on which coastal communities depend 
nationwide.

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