The House Committee on Financial Services approved H.R. 4973 a flood insurance reform bill which also places additional requirements on lenders.

Included in the bill;

• Increases the fines levied for non-enforcement of the mandatory purchase requirement from $350 to $2,000.
• Increases the 1994 coverage limits for residential flood insurance policies from $250,000 (structure) and $100,000 (contents) to $335,000/$135,000.  Nonresidential properties would see an increase from $500,000 to $670,000. These limits, which have not changed since the National Flood Insurance Reform Act of 1994, are adjusted for inflation.  
• Require lenders to provide notice that flood insurance is available to all homeowners, not just those in a designated floodplain, as well as notice of the ability to escrow for flood insurance.

The following amendments were agreed to by voice votes:

• A cap on the penalties against lenders who are required to ensure homeowners have flood insurance.  It also provides for a good faith exemption to ensure lenders are not unfairly penalized due to administrative errors.
• Amends the report language in the bill to also consider the constitutionality of requiring home owners who do not have a federally backed mortgage to participate in the National Flood Insurance Program.
  

To view the full Press Release from the House Committee on Financial Services website please click on the following link.

H.R. 4973, the Flood Insurance Reform and Modernization (FIRM) Act of 2006