BOSTON — Citing the potential for federal flood insurance increases to be reintroduced next year, top lawmakers are seeking to lessen the financial blow by reducing the amount of insurance banks can require under mortgage laws.
This week the bill came before the Committee on Financial Services, co-chaired by state Rep. Michael Costello, D-Newburyport. The bill will allow people to carry flood insurance only for the amount of the outstanding mortgage balance, not the replacement value of the home.
“We don’t have a lot of ability to influence the federal (flood insurance) law,” said Costello. “But this will give some immediate relief to homeowners. At least it will let people know that their property will be protected at a much lower rate.”
The bill is in reaction to growing concerns over the 2012 Biggert-Waters Flood Insurance Reform Act, which required new flood maps, the elimination of some discounts and more accurate risk measurements to boost solvency of the National Flood Insurance Program. Its net effect has been to greatly increase the number of homeowners in flood zones, requiring many more property owners to get federal flood insurance. The law also substantially increases the premiums on that insurance.
Thousands of property owners along Plum Island and Salisbury Beach are in the flood zone, as well as property owners who live on or near the Merrimack River, Parker River, and other waterways in local area.
Costello said few local constituents have contacted his office regarding the new flood insurance rates, mostly because the cost of the higher premiums hasn’t hit yet. But there are some startling stories trickling out from places where the bills have arrived.
“There’s been some stories out of Marshfield. One was a $68,000 bill for homeowners insurance, and it only covers a $250,000 loss,” he said.