Flood Insurance Reform Act of 2004

FLOOD INSURANCE REFORM ACT OF 2004

Mr. NELSON of Florida. Mr. President, I commend Senators SHELBY, SARBANES, and BUNNING for their efforts in drafting the S. 2238, the Bunning/Bereuter/Blumenauer Flood Insurance Reform Act. They have worked with Senator GRAHAM and me to make some important changes that will greatly benefit Federal flood insurance policy holders. Since 1968, the National Flood Insurance Program has provided reasonably priced insurance to Americans across the country. In Florida alone, there are approximately 2 million flood insurance policies.

I support this legislation and, as the former elected insurance commissioner of the State of Florida, appreciate its goals and purpose. However, I have a unique situation in Florida dealing with flood insurance and would like to take a few minutes to bring it to my colleagues' attention.

There is a community in Gulf Country in North Florida known as Cape San Blas. The area has some of the most impressive, pristine beaches in the State. You can see the unique physical characteristics of the Cape quite clearly from space-it is a swath of land that juts out into the Gulf of Mexico.

Most of the residents of Cape San Blas have lived there for some time and have seen first hand the incredible damage and awesome forces of nature brought to bear by hurricanes. And ere we are today, 2 weeks into hurricane season and a good number of the residents of the Cape either do not have flood insurance or have to purchase it at a very high price.

Since 1983, most of Cape San Blas has been included in the Coastal Barrier Resources System, which prevents the Cape from receiving many forms of Federal assistance, most notably flood insurance. But the residents made due by other means, relying on the private market or, in some cases, simply not purchasing flood insurance because it was not a requirement at the time.

Back in 1995, after Hurricane Opal tore through parts of the Florida panhandle, the Federal Emergency Management Agency, FEMA, determined its flood maps required revisions. The agency decided it would need to remap the area and began the process. The new maps took effect in November 202 and placed a large portion of the Cape and the surrounding area in a special flood hazard area-an area of land that has a 1 percent chance of being flooded in any given year. A home located within this area has a 26 percent chance of suffering flood damage during the term of a 30-year mortgage.

The special flood hazard area designation has had a devastating effect on the local economy for several reasons. First, under the Flood Disaster Protection Act of 1973 mandates flood insurance for property in a special flood hazard area that receives a federally backed loan. If a local bank writes a home loan, without Federal backing, while the bank may not require flood insurance, it does face a safety and soundness issue and possible enforcement action with federal banking regulators for offering high-risk loans.

As a result of the new classification, some residents who never had to carry flood insurance before suddenly found it was a requirement. Many long-time homeowners have been forced to scramble to buy private flood insurance, often at very high rates. Some are also prevented from borrowing against their hard-earned equity, because second mortgages also require hard-to-obtain flood insurance. Local banks have had to turn away homeowners because of this.

The new maps and classification have had a devastating effect on homeowners and the local economy already weakened by the closure of a paper mill and saddled with high rates of unemployment. With the stroke of a pen, FEMA radically changed the lives of thousands of residents and property owners in Cape San Blas. On the Cape, prior to FEMA's new maps, about 70 percent of the lands were not in special flood zone areas and financing was easily obtainable. The new maps placed approximately 75 percent of the Cape in a special flood hazard area and financing is near impossible. Even worse, the new flood maps have slowed the new economic engine of the Cape-tourism, construction and development.

This is a clear case of a Government action adversely affecting the lives of citizens. It is simply unfair. There must be a way to make the residents whole again, and I think we have a responsibility to explore every possible avenue to do so. I had considered legislative remedies for the residents of Cape San Blas on the flood insurance bill. Yet I am very aware the flood insurance program is set to expire in 15 days and do not want to block the passage of this legislation, which is so critical to Florida and the Nation. But in the coming weeks, I intend to work with my colleagues and the Banking and Environment and Public Works Committees, with Congressman ALLEN BOYD, who represents Cape San Blas, and the appropriate Federal agencies to find an equitable solution to the problem facing the residents of Cape San Blas.