BOSTON (AP) — Legislation backed by Attorney General Martha Coakley and state House Speaker Robert DeLeo aims to soften the impact of new federal flood insurance rules on some homeowners.
The bill, unveiled Wednesday, would tie the level of flood insurance that must be purchased to a homeowner’s outstanding mortgage balance rather than the full replacement value of the home. The measure would also prohibit mortgage lenders from requiring coverage for the contents of a home or including a deductible of less than $5,000.
The legislation would provide homeowners who have been hit hard by the federal changes with an option of purchasing cheaper flood insurance, though the reduced premiums would also leave them with the prospect of less coverage should serious flooding occur.
State officials said enormous increases in flood insurance premiums resulting from the new rules that took effect Oct. 1 are having a devastating effect on residents, particularly those on the coast.
The changes, which included a redrawing of the Federal Emergency Management Agency’s flood zone maps and the elimination of federal subsidies, were approved by Congress last year in an effort to keep the National Flood Insurance Program solvent after claims from Hurricane Katrina in 2005.
DeLeo, who represents the coastal community of Winthrop, cited anecdotal reports of homeowners who had been paying $600 for flood insurance now being socked with bills for up to $15,000 under the new maps.
“People aren’t going to be able to pay their insurance, and as a result of that, they are going to lose their homes,” DeLeo told reporters following a House Democratic caucus on Wednesday.
The bill, which was expected to come before the full Legislature in the coming weeks, won’t solve all the problems resulting from the new federal guidelines, officials stressed.
“We continue to urge the federal government to delay implementing these changes until they’ve followed all the steps required by law,” Coakley said in a statement. “In the meantime, this state legislation can help mitigate the impact of these costs on families and businesses.”
The state’s congressional delegation sent a letter to House and Senate leaders last month urging postponement of the rules until a review of the new FEMA flood zone maps is complete.
The state legislation would require mortgage companies to alert borrowers in writing that their coverage might not be enough to cover losses from flooding if they opt for reduced premiums.
“This insurance strictly covers the mortgage, and for anything further, they can either obtain further insurance or assume the risk themselves,” DeLeo said.
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