Congress Remains Stymied by Flood Insurance Reauthorization

Trade groups representing both credit unions and banks lament lack of long-term plan amidst ongoing uncertainty.

If you want evidence of how dysfunctional Congress is, take a look at the National Flood Insurance Program (NFIP).

Unable to pass a long-term reauthorization, Congress has enacted about 20 short-term renewals of the program since 2017. It even has lapsed a few times, stalling an estimated 1,000 home purchases each day.

The Congressional Research Service has written report after report noting the impact of the uncertainties surrounding the program, which is next scheduled to lapse on September 30. It’s likely to be extended once again, though.

And so, on Wednesday, a House subcommittee held yet another hearing seeking ideas about how the program may be improved.

And immediately, Rep. French Hill, R-Ark., the ranking GOP member of the House Housing, Community Development and Insurance Subcommittee, blamed Democrats for the gridlock.

“The majority has left this bill on autopilot,” he said, adding that the House Financial Services Committee approved a bipartisan flood insurance bill, but Chairwoman Rep. Maxine Waters, D-Calif., did not take the bill to the House floor.

Response from Credit Union and Bank Groups

Financial services trade groups representing both credit unions and banks have emphasized the need to prevent the program from lapsing.

The National Association of Federally-Insured Credit Unions “encourages Congress to enact a long-term reauthorization to reform and modernize the NFIP, and we stand ready to work with Congress in this regard,” wrote Brad Thaler, the advocacy group’s vice president of legislative affairs, in a letter to the House Financial Services Committee prior to the subcommittee hearing. “However, with the NFIP in danger of lapsing at the end of September, it is critical that Congress enact an extension of the program in time to ensure that the NFIP is not disrupted.”

The American Bankers Association struck a similar note, with Executive Vice President of Congressional Relations and Legislative Affairs Kirsten Sutten claiming, in her own letter to the committee, “The ongoing series of short-term extensions of program authority—and the potential for lapses in authority—destabilize the mortgage process.”

Bigger Problems Plaguing the Program

Some of the issues are geographic; some are political. A memo prepared by the Democratic staff of the House Financial Services Committee paints a stark picture.

The NFIP was largely self-supporting until 2005, when it incurred losses as a result of Hurricanes Katrina, Rita, and Wilma. Things got worse following Superstorm Sandy in 2012 and Hurricanes Harvey, Irma, and Maria in 2017. As a result, the program currently carries a debt of $20.5 billion.

Policyholders pay off the debt through premiums and fees, and the program must pay millions of dollars in interest payments to the Treasury Department. Waters has pushed legislation to forgive the debt.

Congress has struggled with a variety of political concerns as lawmakers haggle over how best to reauthorize the program. Some Democrats want to cap premium increases, and forgive the debt and means test premiums. Some Republicans oppose forgiving the debt. Various sides also clash over the federal government’s responsibility to rebuild homes in flood plains as well as the role of private insurers in the program.

One witness testifying at the subcommittee hearing Wednesday compared the NFIP to federal crop insurance.

“As a point of comparison, the federal crop insurance program now costs taxpayers approximately $8 billion annually,” Karen McHugh, region 7 director of the Association of State Floodplain Managers, told the panel. “Yet the program is not required to pay that debt back—with interest—while fulfilling almost exactly the same public policy goal; to reduce much larger costs to the taxpayers for agriculture disaster.”

Quick Resolution Not Expected

A timely solution is not likely forthcoming, with the matter not high on most lawmakers’ priority lists and Congress having a difficult enough time passing anything as it is. And it’s an election year.

Roy Wright, president/CEO of the Insurance Institute for Business & Home Safety may have summed up the situation best, telling the subcommittee, “If the work of reauthorization was easy, Congress would have passed a simple, long-term re-authorization years ago. Congress is wrapping up six years of reauthorization this fall.”