Flood insurance mandates may finally become a reality - possibly as soon as July - now that the House has passed a sanitized version of Rep. Joseph Kennedy's industry-maligned flood insurance bill. But despite Kennedy's concessions, House and industry sources expect still more changes before it becomes law.

The house legislation now closely resembles the legislation passed by the Senate March 16. The Senate version of the flood bill, authored by Sen. John Kerry, D-Mass., was passed as part of the Community Development Banking and Financial Institutions Act.

The passage of the Kerry bill, which had foundered in the Senate for about three years, provided the House with a rare opportunity to move the defeat-prone legislation forward.

The House hasn't named conferees for the flood provision of the CDFI yet, and sources don't expect them to be named soon, at least not until Congress has dealt with the interstate banking bill. But the legislation is still expected to pass by July.

There was some debate within the House Banking Committee about whether to pass the Kennedy legislation or to wait for Florida Democrat Jim Bacchus' flood bill, which included much of the same language written into the Kerry legislation. But Kennedy, D-Mass., and Bacchus reached a compromise and some of the more onerous provisions of Kennedy's bill were tossed out - specifically a provision denying new construction in flood hazard areas, which home builders found objectionable.

The bill went to the House floor under suspension and was approved by a 335-60 vote.

Sources believe the bills are likely to meet with quick approval in conference, but said some differences still exist. Both Houses approved a flood risk mitigation fund provision, but capitalization of that fund has become a stickling point.

The House version calls for use of the mitigation grant method which would place an annual surcharge on policyholders not to exceed $10 for dwellings insured up to $150,000, $20 for dwellings insured above $150,000, and $40 for nonresidential dwellings. Kennedy contends this would generate $75 million annually and would not create an unfunded taxpayer liability.

In approving its bill, the Senate passed a similar mitigation provision. But House sources said the Senate, led by Sen. Connie Mack, R-Fla., only did so because it didn't want to slow the legislative process. Mack, who will also be a member in the conference committee, prefers the alternative - an insurance fund that would charge monthly premiums rather than an annual upfront surcharge - and House sources acknowledged he presents a formidable obstacle to passage of that provision.

The bill also has many nearly identical requirements, including language calling for a Federal Emergency Management Agency erosion zone mapping study. A major road block in the approval of the legislation was removed when the requirement for a nationwide $25 million FEMA erosion zone mapping study was ousted in favor of the two-year study favored by the Senate and real estate industry.

Both bills also:

* Increase mandatory flood insurance purchase requirements to all lenders, including mortgage bankers, and also require Fannie Mae and Freddie Mac to design procedures to ensure that flood insurance is continued through the life of the loan;

* Require lenders to establish escrow accounts for flood insurance premiums for residential real estate if they already escrow for other purposes.

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