House poised to advance flood insurance reform, beneficial owner rules
WASHINGTON — The House Financial Services Committee on Wednesday approved a bill unanimously to reform the National Flood Insurance Program.
Lawmakers finally see an opening to put the program on firmer footing after Congress, unable to pass long-term reform, previously resorted to nearly a dozen short-term NFIP extensions since fiscal year 2017.
The committee also approved a bill requiring companies to disclose beneficial owners. The legislation, intended to combat the money-laundering risk from shell companies, would shift burden away from banks now required to identify beneficial owners of business accounts. It passed the committee by a vote of 43 to 16, with 10 Republicans joining all Democrats in supporting the measure.
The flood insurance bill sponsored by Chairwoman Maxine Waters, D-Calif., drew bipartisan praise during the committee debate, including from Rep. Patrick McHenry, R-N.C., the panel's top Republican. A previous flood insurance bill passed the House in 2017, but that legislation was more along party lines and not supported by Waters, who was then in the minority.
“Let me just make sure that everyone understands that the ranking member and I were convinced that we could do a lot better than these short-term extensions,” Waters said. “So we have worked very hard to give consideration to the concerns of both sides of the aisle to put forth a long-term reauthorization. And I am very pleased that we are able to present this bill today that is supported by both sides.”
The bill would reauthorize the program for five years, require disclosure of property-specific risks for homeowners and homebuyers, update maps to create new flood zones, and enable individuals with non-NFIP policies to return to the program without penalty.
McHenry, who hails from a state prone to storm flooding, said the bill presented to the committee was a result of significant compromise between both parties.
“It is not without a deep compromise on the Democrat side of the aisle or on the Republican side of the aisle,” McHenry said. “What we have before us is a series of customer-driven, customer-focused reforms.”
Some lawmakers have expressed concern that the program contributes to the national debt and puts taxpayers on the hook. But Rep. Sean Duffy, R-Wis., said the bill is a step in the right direction to improving a program that insures more than 5 million property owners, renters and businesses. Insurance is required to close mortgages on home purchases in designated flood areas.
“I don’t think it’s really addressing the math issues and the deficit issues that we have with the program,” Duffy said of Waters' bill. “But I do think that it’s going to go a long way in making that program work better and offload some of the risks to the private sector. … The fact that we don’t have to deal with flood for four or five years is a fantastic win for this whole committee.”
However, it is still unclear if the bill will draw support in the Senate, where members from flood-prone states have resisted reform efforts, citing concerns about premium costs for homeowners.
Following the release of Waters' bill, Republican Sens. Bill Cassidy and John Kennedy, both of Louisiana, issued a joint press release saying the legislation "lacks the critical reforms to ensure the sustainability and affordability of the program for American homeowners."
"Our first priority should be to make sure this program works for the homeowners that depend on it,” Cassidy said in the release.
A long-term flood insurance fix has been a priority for the banking industry, and the bill was supported by the American Bankers Association.
“A long-term reauthorization has been a high-priority issue for the ABA and our members, as stability in the NFIP is essential to ensuring that borrowers in flood prone areas can access the insurance needed to protect their properties and the collateral securing their mortgage loans,” James Ballentine, executive vice president for political affairs and congressional relations at the ABA, said in a letter to Waters and McHenry on Monday. “The series of short-term extensions of program authority — and the potential for lapses in authority — destabilize the mortgage process.”
Meanwhile, the committee overwhelmingly supported the Corporate Transparency Act. The bill, also supported by the banking industry, would require companies to disclose their beneficial owners to the Financial Crimes Enforcement Network, relieving their banks of that burden.
While Democrats on the committee fell in line during the debate on the bill, sponsored by Rep. Carolyn Maloney, D-N.Y., the markup showcased a sharp split between Republican on the issue.
Some Republicans have raised concerns that the bill would be overly burdensome to small businesses. They say there isn’t enough data proving that a government database of beneficial ownership information would adequately combat terrorism finance.
“Yesterday Fincen provided us with some data but has yet to provide data answering my specific questions,” McHenry said during the debate on the bill Tuesday. “The information received does not justify the burden made on small businesses.”
But Reps. Blaine Luetkemeyer, R-Mo., Ann Wagner, R-Mo., and Peter King, R-N.Y., argued that the bill strikes a balance between relieving regulatory burdens, providing adequate privacy protections, and giving law enforcement the tools to combat illicit finance.
“Any small business that is unaware of the reporting requirements … is not subject to penalty,” Luetkemeyer said. “Our goal is to go after bad actors, not mom-and-pop shops.”
Maloney said she took Republicans’ privacy concerns “seriously” by including language that would require law enforcement to have an existing investigatory basis for any request of beneficial ownership information.
“Law enforcement should not be able to search the database randomly without any connection to an actual investigation,” Maloney said.
Committee passage of the Corporate Transparency Act came after Sens. Mark Warner, D-Va., Doug Jones, D-Ala., Tom Cotton, R-Ark., and Mike Rounds, R-S.D., released similar draft legislation Monday. The Senate Banking Committee is scheduled to hold a hearing on beneficial ownership June 20.