WASHINGTON, D.C. – January 14, 2015 – (RealEstateRama) — Steven Bradshaw, Executive Vice President of Standard Mortgage Corporation, on behalf of the Mortgage Bankers Association (MBA), testified today before the House Financial Services Subcommittee on Housing and Insurance at a hearing titled, “How to Create a More Robust and Private Flood Insurance Marketplace.”
Below is a copy of Mr. Bradshaw’s oral testimony, as prepared for delivery.
“Chairman Luetkemeyer, Ranking Member Cleaver and members of the subcommittee, my name is Steve Bradshaw and I appreciate the opportunity to testify today on behalf of the Mortgage Bankers Association.
“I am currently the Executive Vice President of Standard Mortgage Corporation, a lender and servicer headquartered in New Orleans, Louisiana. The company was founded in 1925 and currently services approximately 28,000 residential mortgage loans throughout the Southeast.
“This past August marked the 10th anniversary of one of the most significant flood event in U.S. history – Hurricane Katrina. We experienced the massive devastation firsthand. Approximately 3,500 of our servicing customers sustained significant flood damage to their homes. And on a more personal note, nearly two-thirds of our staff lost their homes. As a result of Hurricane Katrina and two other significant storms in the fall of 2005, more than one million housing units were damaged across five states.
“There is no doubt that the National Flood Insurance Program was a key component of the Gulf Coast’s recovery, just as it has been for other communities across the country that have sustained major flooding. “But there is also no doubt that the NFIP needs to be reformed. The program is $23 billion in debt and simply not sustainable as is. The federal government cannot and should not bear the full burden of post-disaster recovery.
“Congress recognized when it passed the Biggert-Waters Act that private sector flood insurance must be allowed to develop in order to ensure a stable, sustainable, and affordable market.
“Expanding flood insurance options will make it easier for more homeowners to obtain flood insurance. A competitive flood insurance market will expand available insurance options, lower costs, and increase the number of at-risk properties that are insured.
“For example, many homes that were destroyed by Hurricane Katrina were not located in a special flood hazard area. Homes outside of those zones are not required to have flood insurance. As a result, mortgage servicers were liable for the costs when those homes were wiped out.
“MBA believes that increased private sector involvement can also serve to shift some of the burden of post-disaster recovery away from the federal government and to the private sector. This will limit taxpayer exposure to future flood losses. “In light of this, we support H.R. 2901, the Flood Insurance Market Parity and Modernization Act. The bill provides two important improvements to the NFIP.
“First, the bill clarifies what constitutes an acceptable private flood insurance policy by providing a clear definition of private flood insurance. This will make it easier for lenders to accept private policies to satisfy the mandatory purchase requirement.
“Second, H.R. 2901 addresses lenders’ concerns regarding continuous coverage requirements. Under current law, it is unclear whether someone previously covered under an NFIP policy who moves to a private carrier would be eligible to return to the NFIP policy at their previous rate.
“We are pleased that H.R. 2901 eliminates the disincentive for consumers to choose a private policy. It does so by clarifying that private flood insurance satisfies the continuous coverage requirement.
“In summary, MBA supports H.R. 2901 as a simple way to encourage the growth of a competitive private flood insurance market. Increased private sector involvement will hopefully expand available insurance options for borrowers, lower costs for consumers, and reduce taxpayer exposure to flood losses over time. We are especially grateful for the leadership shown by Representatives Dennis Ross and Patrick Murphy on this legislation and urge this subcommittee to approve it. “Thank you again for the opportunity to testify today. MBA commends your efforts to expand the private flood insurance market. I look forward to any questions you may have.”
Rob Van Raaphorst
(202) 557- 2799