In recent months many homeowners, potential homeowners and lenders have become alarmed over dramatic rate increases for coverage under the National Flood Insurance Program as a result of reforms enacted as part of the Biggert-Waters Act of 2012. Additional concerns have been raised over unintended consequences stemming from new escrow requirements included in the reform bill.
ABA and ABIA have worked extensively with Congress and a broad coalition of industry and consumer groups to move legislation to address these unintended consequences in a responsible fashion.
The House passed this legislation on March 4 by a vote of 306 to 91, and the bill is expected to be signed by the president.
Among other things, the legislation would reinstate lower rates for grandfathered properties that were repealed under Biggert-Waters and would extend the effective date for new escrow rules required under Biggert-Waters from July 6, 2014 to January 1, 2016. The bill also clarifies that many loans would not be subject to mandatory escrow requirements including:
- Commercial purpose loans secured by a residence.
- Second liens (if at the time of origination the first lien is properly insured).
- Condominium and cooperative loans (assuming the RCBAP is properly insured).
- Home equity lines of credit.
- Nonperforming loans.
- Loans with a term of less than 12 months.
Additionally the bill clarifies that mandatory escrow only applies to loans that are originated, refinanced, increased, extended or renewed on or after January 1, 2016. The costs of the bill are offset by a $25 annual fee on NFIP policy holders for primary residential properties and a $250 annual fee for policies on second homes and businesses.
Read the bill.