House, Senate finally concur on flood bill.

House and Senate conferees finally agreed on flood insurance legislation July 18, and, if approved by the full Congress as is expected, mortgage lenders could be escrowing for flood insurance for borrowers and force placing it for borrowers that dont have it by early 1995.

The bill, which has been wandering the halls of Congress in some form for more than three years, would require mortgage lenders to establish escrow accounts for flood insurance premiums for residential real estate loans if they escrow for other purposes. It would also require lenders to force place insurance for a property where the borrower is notified of the need to purchase flood insurance, but fails to purchase it.

The bill was approved in both houses in May and, as expected, breezed through conference committee, mostly because contentious provisions previously offered in the House and Senate by Rep. Joseph Kennedy II, D-Mass., and Sen. John Kerry, D-Mass., were removedsuch as denying new construction in flood hazard areas, which home builders and Realtors found objectionable.

The bill would also:

*Require federal agency lenders and government-sponsored enterprises to ensure that flood insurance is maintained over the life of a loan;

*Allow lenders to charge a reasonable fee for flood hazard determinations on loan originations;

*Allows regulators to levy a $350 fine for each violation on lenders and GSEs who have a pattern and practice of failing to require the purchase of flood insurance. The annual penalty may not exceed $100,000 per lender;

*Require regulators, when conducting examinations, to assess lender compliance with flood insurance regulations;

*Authorize and codify the community rating system which provides incentives for preventative actions by communities to reduce losses;

*Establish a National Flood Mitigation Fund, supported by the National Flood Insurance Fund that will provide up to $20 million annually in grants to reduce the risk of flood damage;

*Requires the study of the economic impact of erosion on the NFIP and the communities that participate in the program, including an assessment of the costs and benefits of mapping erosion hazard areas;

*Repeals the flood property purchase and loan program and the erosion-threatened structures program. Activities in these programs will be eligible for funding through grants from the NFMP;

*Limits premium increases for risk clarifications of policyholders to no more than 10% per year; and

*Raises the maximum coverage amounts to $250,000 for a single-home and $500,000 for nonresidential property.

Conferees were seeking to complete work on the bill July 21, in hopes that staffers could then complete the conference report on the two bills for a vote by Congress, and then by the president before mid- August. Congress is scheduled to recess for several weeks before returning after Labor Day.

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