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IMPLEMENTATION OF THE BIGGERT–WATERS 

FLOOD INSURANCE ACT OF 2012: 

PROTECTING TAXPAYERS AND HOMEOWNERS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND INSURANCE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

NOVEMBER 19, 2013 

Printed for the use of the Committee on Financial Services 

Serial No. 113–52 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

GARY G. MILLER, California, Vice Chairman 

SPENCER BACHUS, Alabama, Chairman 

Emeritus 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

MICHAEL G. GRIMM, New York 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

TOM COTTON, Arkansas 

KEITH J. ROTHFUS, Pennsylvania 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON HOUSING AND INSURANCE

RANDY NEUGEBAUER, Texas, Chairman 

BLAINE LUETKEMEYER, Missouri, Vice 

Chairman 

EDWARD R. ROYCE, California 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

LYNN A. WESTMORELAND, Georgia 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

MICHAEL E. CAPUANO, Massachusetts, 

Ranking Member 

NYDIA M. VELA ́ ZQUEZ, New York 

EMANUEL CLEAVER, Missouri 

WM. LACY CLAY, Missouri 

BRAD SHERMAN, California 

JAMES A. HIMES, Connecticut 

CAROLYN MCCARTHY, New York 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

November 19, 2013 ........................................................................................... 1 

Appendix: 

November 19, 2013 ........................................................................................... 61 

WITNESSES 

TUESDAY, NOVEMBER 19, 2013 

Berginnis, Chad, Executive Director, the Association of State Floodplain Managers (ASFPM) ..................................................................................................... 45 

Fugate, Hon. Craig, Administrator, Federal Emergency Management Agency 

(FEMA) .................................................................................................................. 8 

Hecht, Michael, President and Chief Executive Officer, Greater New Orleans, 

Inc. ......................................................................................................................... 40 

Holtz-Eakin, Douglas, President, the American Action Forum ........................... 47 

Rutenberg, Barry, Immediate Past Chairman of the Board, the National 

Association of Home Builders (NAHB) ............................................................... 44 

Saks, Joshua, Legislative Director, the National Wildlife Federation (NWF) .... 38 

Veissi, Maurice ‘‘Moe,’’ Immediate Past President, the National Association 

of REALTORS® (NAR) ........................................................................................ 42 

APPENDIX 

Prepared statements: 

Berginnis, Chad ................................................................................................ 62 

Fugate, Hon. Craig ........................................................................................... 79 

Hecht, Michael .................................................................................................. 88 

Holtz-Eakin, Douglas ....................................................................................... 94 

Rutenberg, Barry .............................................................................................. 104 

Saks, Joshua ..................................................................................................... 164 

Veissi, Maurice ‘‘Moe’’ ...................................................................................... 170 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Neugebauer, Hon. Randy: 

Written statement of Hon. Bill Cassidy, a Representative in Congress 

from the State of Louisiana ......................................................................... 190 

Written statement of Hon. Jack Kingston, a Representative in Congress 

from the State of Georgia ............................................................................. 191 

Written statement of Hon. Steven Palazzo, a Representative in Congress 

from the State of Mississippi ....................................................................... 192 

Written statement on behalf of the City of Galveston, Texas ...................... 197 

Written statement of the Big ‘‘I’’ ..................................................................... 200 

Written statement of the National Association of Mutual Insurance Companies (NAMIC) ............................................................................................ 208 

Written statement of Craig Poulton, CEO, Poulton Associates, Inc. ........... 213 

Written statement of members of the ‘‘Write-Your-Own’’ Flood Insurance 

Coalition ......................................................................................................... 217 

Capito, Hon. Shelley Moore: 

Article from the Charleston Daily Mail entitled, ‘‘Homeowners worry 

about flood insurance rates,’’ dated October 24, 2013 ............................... 218 

Luetkemeyer, Hon. Blaine: 

Letter to FEMA Administrator Craig Fugate from various undersigned 

organizations, dated November 15, 2013 .................................................... 221 

Page

VI 

Lynch, Hon. Stephen: 

Letter from Otto K. Harling, Ph.D., dated November 6, 2013 ...................... 223 

Written statement of the Independent Community Bankers of America 

(ICBA) ............................................................................................................ 225 

Written statement of the National Association of Home Builders (NAHB) 228 

Written statement of the National Association of REALTORS® (NAR) ..... 229 

National League of Cities Resolution in Support of an Affordable and 

Sustainable National Flood Insurance Program ........................................ 230 

Murphy, Hon. Patrick: 

Written statement of the National Association of Federal Credit Unions 

(NAFCU) ........................................................................................................ 232 

Sinema, Hon. Kyrsten: 

Written responses to questions submitted to Hon. Craig Fugate ................ 233 

Written responses to questions submitted to Barry Rutenberg ................... 234 

Written responses to questions submitted to Maurice ‘‘Moe’’ Veissi ............ 236 

Velazquez, Hon. Nydia: 

Written statement of Homeowners in Red Hook, Brooklyn .......................... 251 

Written statement of Andrea Kondaks Sansom, Brooklyn, New York ........ 254 

(1) 

IMPLEMENTATION OF THE 

BIGGERT–WATERS FLOOD 

INSURANCE ACT OF 2012: 

PROTECTING TAXPAYERS 

AND HOMEOWNERS 

Tuesday, November 19, 2013 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HOUSING

AND INSURANCE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 1:32 p.m., in room 

2128, Rayburn House Office Building, Hon. Randy Neugebauer 

[chairman of the subcommittee] presiding. 

Members present: Representatives Neugebauer, Luetkemeyer, 

Capito, Garrett, Westmoreland, Hurt, Stivers, Ross; Capuano, 

Velazquez, Cleaver, Clay, Sherman, Himes, Sinema, and Beatty. 

Ex officio present: Representatives Hensarling and Waters. 

Also present: Representatives Cassidy, Grimm, Jones, Scalise, 

Buchanan; Lynch, Green of Texas, Richmond, McIntyre, Scott of 

Virginia, Meeks, Jackson Lee, and Murphy of Florida. 

Chairman NEUGEBAUER. Good afternoon. I call the committee to 

order. We will have opening statements, and they will be limited 

to 10 minutes per side, as previously agreed upon. 

I want to recognize the attendance of Members who are not assigned to the Housing and Insurance Subcommittee. And, without 

objection, members of the full Financial Services Committee, who 

are not members of this subcommittee, are welcome to sit on the 

dais and participate in today’s hearing. 

Also, without objection, Members of Congress who are not members of the Financial Services Committee may sit on the dais today, 

but consistent with our committee policy, they may not be recognized or yielded to for any purpose. 

If they have any written statements, we will include them in the 

hearing record under the general leave. 

Now, at this time, I will give my opening statement. The title of 

today’s hearing is, ‘‘Implementation of the Biggert-Waters Flood Insurance Act of 2012: Protecting Taxpayers and Homeowners.’’ 

In other hearings that we have had in the Financial Services 

Committee, one of the common things that we hear from time to 

time is that government is not very good at pricing risk. And, quite 

honestly, one of the reasons that government is not good at pricing 

2 

risk is because sometimes instead of pricing it actuarially or based 

on a risk model, it is priced politically. 

We only have to look at the GSEs, FHA, Medicare, and maybe 

even Obamacare to determine that the government, in fact, does 

not have a very good track record of being in the insurance business. 

This has real consequences for the American taxpayers. Currently, we are $17 trillion in debt, and I know if Chairman Hensarling was here, he would want the debt clock up on the board 

there. 

How did we get to $17 trillion in debt? Partially, it is because 

the taxpayers backed some things that didn’t work out, obviously, 

with almost $200 billion that they put into the GSEs. 

The National Flood Insurance Program (NFIP) is another example. GAO decided in 2006 that it was high risk, and it currently 

is $24 billion in debt and authorized to borrow up to, I believe, 

about $30 billion. 

So the Congress recognized this trend a number of years ago and 

began to have some discussions, in a bipartisan way, both Democrats and Republicans, of moving the Flood Insurance Program to 

a model where people were actually paying for the risk that was 

being borne by the Flood Insurance Program. 

Biggert-Waters began that process. And, as I said, Republicans 

and Democrats overwhelmingly voted to move this process where 

people were paying their actuarially sound rate which would make 

sure that the program would be self-sufficient. 

And so, today’s hearing is really about discussing the progress of 

the implementation of this program. Also, I think one of the things 

that we have learned is that there is a lot of misinformation about 

the implementation of this program. 

Hopefully, this will be informative as well of assuring homeowners that there is a process here, there is a method to the madness and that, in many cases, some of the stories that we have 

heard aren’t necessarily true. 

But my subcommittee, for example, found out that there was a 

quite a bit of misinformation, particularly about the Section 207 

program. And so, we are going to hear a little bit today about that. 

We do know that some of the stories that are out there are troubling to our homeowners, but I think one of the things that everybody needs to understand is that this Flood Insurance Program is 

designed to provide protection to homeowners who are in highly 

flood-prone areas. And that its ability to be responsive in the case 

of natural disasters and flooding is to have a program that is physically sound. 

I would particularly like to thank Dr. Cassidy from Louisiana. 

He has been very helpful to the committee in beginning to understand some of the coastal issues that are going on in his home 

State of Louisiana. He and his staff have been very good resources 

for the committee. And so, Dr. Cassidy, we appreciate that. We are 

glad that you are joining us today. 

With that, I will yield back my time. And at this time, I will 

yield to the vice chairman of the full Financial Services Committee, 

Mr. Luetkemeyer, for 2 minutes. 

3 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. I am glad Mr. 

Fugate is here today. And I hope that this hearing will produce results about both taxpayers and homeowners alike. 

My district includes many communities that sit in the floodplain 

along major streams and rivers. It is also home to Lake of the 

Ozarks, which has more coastline than the State of California. I am 

hearing more and more from my constituents who are astounded 

by the problems they are having with the National Flood Insurance 

Program. 

We need, in my opinion, to focus on two immediate objectives 

with NFIP. First, we owe it to our constituents living in the floodplain to create a program that is stable, fair, and accessible. And 

we need to have the specifics of that program clearly communicated 

by FEMA to all stakeholders. 

Second, we owe it to the American taxpayers to create a program 

that is solid, and allows for an increased role for the private market. We have taken important steps to create a sound program, a 

program that includes changes agreed to by 402 of my House colleagues in 2012. 

In the last several months, we have seen an increase in the private market’s willingness to enter the flood insurance space. I don’t 

think we should completely turn our back on the progress that has 

been made. It is clear that this program, the manner in which it 

is being implemented, is in need of greater scrutiny. 

I look forward to hearing from our distinguished panelists, and 

I yield back the balance of my time. 

Chairman NEUGEBAUER. I thank the gentleman. Mr. Lynch from 

Massachusetts is recognized for 2 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman. I appreciate your courtesy. And I want to thank this witness, Mr. Fugate, as well as the 

other witnesses in the following panel for their willingness to come 

before the committee, and help us with our work. 

What I am hoping—I recently attended a local community meeting on the new flood insurance process, which I would say between 

1,000 and 1,400 of my closest neighbors from the South Shore of 

Massachusetts attended. And based on the response there, the 

number of people who brought their new bills from their insurance 

companies, and the increase of premiums, we were looking at, in 

many cases, a 500 percent, sometimes 1,000 percent increase in the 

premiums of those flood insurance rates under the new maps. 

I would say, just based on looking at my district, the threat of 

forcing people from their homes by these increases in premiums is 

probably equal to the removal of people from their homes during 

some of the storms that we are trying to address. 

I just hope that during this hearing, during this whole process, 

we may be able to re-engineer the Biggert-Waters flood map process in a way that allows families to stay in their homes, but recognizes the instability of the fund itself. 

But rather than recapitalizing the fund over a very short period, 

look at what GAO recommended in their study, which was to delay 

the implementation, or to phase in over a longer period, the increase in rates that would actually allow people to stay in their 

homes, especially those who are on fixed incomes, who live in the 

South Shore communities like Scituate and Cohasset that I repVerDate Nov 24 2008 18:11 Jul 18, 2014 Jkt 086687 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\86687.TXT TERRI
4 

resent, and Marshfield in Massachusetts, that Mr. Keating represents; and I think accomplish both the goals that we have to stabilize the Flood Insurance Program, but also recognize the reality 

of people who are living in coastal communities, whether that be 

Massachusetts, or Louisiana, or Mississippi, or in New York, but 

taking a more holistic approach to the issue of flood insurance. 

With that, Mr. Chairman, I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. And now, the 

gentlewoman from California, one of the primary authors of 

Biggert-Waters, the ranking member of the full committee, Ms. 

Waters, is recognized for 5 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman, and Members. I am so pleased that we are having this hearing today. It is 

most timely, given what is happening across this country in all of 

our districts. 

Both Democrats and Republicans are receiving an unprecedented 

number of calls and complaints about the Biggert-Waters bill. I feel 

a responsibility to do everything possible to straighten out the unintended consequences of Biggert-Waters. Ms. Biggert is not here. 

Ms. Waters is left to deal with this, and deal with it I shall. 

In 2012, when I initially agreed to be a co-author of the BiggertWaters Act, our goal was to create a bipartisan solution to repair 

our ailing National Flood Insurance Program. I did so because I 

understand the importance of the program for people living in 

flood-prone regions. 

The program helped rebuild many areas in the southeastern part 

of the United States after Hurricanes Katrina, Rita, and Isaac. It 

is helping New York and New Jersey rebuild after Superstorm 

Sandy. We need a healthy program to ensure all communities have 

a safety net that helps them to pick up the pieces, should they experience such devastation. 

But the reality is, many of these unforeseen catastrophes crushed 

the program financially, putting it $24 billion in debt. The BiggertWaters flood insurance legislation was designed to update the National Flood Insurance Program, and put it on a path to stability 

through a 5-year extension, and a 10-year repayment plan. 

The law was supported on a bipartisan basis. And I think I can 

speak for my Republican colleagues when I say neither Democrats 

nor Republicans envisioned it would inflict the pain and concern 

that many Americans are experiencing. That bill was voted out 402 

to 18. 

In my view, it certainly didn’t have to be this way. But I have 

met with FEMA. I have talked with them, and I think I understand something of what happened with the way that this has been 

implemented. 

The first thing that I want to address is the fact that we included 

in the bill that there should be an affordability study, which has 

not been done. 

There are some other areas of concern that I have with FEMA 

that I cannot go into at this time. I don’t have enough time. But 

having said that, FEMA did not complete either the remapping 

that I think was indicated in the bill, or the affordability study. 

But somehow they began to announce dramatic increases for 

many of the policyholders. I think that this was distorted. SomeVerDate Nov 24 2008 18:11 Jul 18, 2014 Jkt 086687 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 K:\DOCS\86687.TXT TERRI
5 

how, the intentions of our well-meaning piece of legislation has 

caused grief to families from coast to coast. I do think this could 

have been avoided. 

I hope, Mr. Chairman, the majority of our time here today can 

be used to discuss how we can fix this broken program. As many 

of you know, I have joined with Congressman Grimm, Congressman Cedric Richmond of New Orleans, and 131 other Members of 

Congress in introducing bipartisan legislation that would delay 

many premium increases for 4 years, until FEMA and Congress 

can ensure changes will be implemented in an affordable, responsible manner. 

Mr. Chairman, and Members, I think you can see that a number 

of these co-sponsors not on this committee have joined us here 

today, including, as I said, Representative Cedric Richmond, and 

Representatives Bobby Scott of Virginia, Mike McIntyre of North 

Carolina, Bill Cassidy of Louisiana, and Walter Jones of North 

Carolina. And we expect some more Members to show up. This is 

a bipartisan, bicameral effort that will ensure FEMA engages in an 

accurate and responsible remapping process by forcing it to certify 

that maps are accurate and reliable. And Mr. Fugate, it will force 

the implementation of the affordability study of your agency that 

should have been completed last April. 

This bill would mandate that FEMA propose an affordability 

framework to address flood insurance costs within 18 months after 

the completion of the study. It would also establish a flood insurance advocate within FEMA who will answer our constituents’ 

questions about the flood-mapping process, and flood insurance 

rates. 

Mr. Chairman, we have to make sure that FEMA implements 

this program in the way that it was intended, and in a responsible 

and affordable way. Of course, I look forward to the witnesses’ testimony, and a robust discussion to ensure we have a well-organized 

and sustainable National Flood Insurance Program that will continue to be affordable, and ensure hundreds of thousands of American families have the peace of mind to know they are protected in 

case of a disaster. 

Mr. Chairman, I spent a part of our break in Louisiana. I went 

down to Plaquemines Parish, where people are suffering. And even 

though that was the only place that I was able to go to, I did a 

conference call with over 127 organizations throughout America 

who are organized around reform, and making sure that we have 

a program that is affordable, and that will protect the most vulnerable of our citizens at a time when they need it. 

I thank you so very much. And I yield back the balance of my 

time. 

Chairman NEUGEBAUER. I thank the gentlewoman. And now, the 

gentlewoman from West Virginia, the chairwoman of the House Financial Institutions Subcommittee, Mrs. Capito, is recognized for 1 

minute. 

Mrs. CAPITO. Thank you, Mr. Chairman, for holding this very important hearing on the implementation of Biggert-Waters. 

I represent West Virginia. We have a lot of floods, we have a lot 

of water, we have a lot of mountains, and we have a lot of valleys. 

6 

And these newly-released premiums have left many of my constituents very concerned. 

I just had a meeting back in my home district. One of the homeowners, a coal miner, just purchased his house in August for 

$160,000. He has been working 20 years to be able to get his dream 

home. 

At the time, his premium was $1,500. He has gotten caught in 

this grandfathering and implementation period, where now he is 

learning that his insurance is going to be $12,000 on a $160,000 

house. 

He is asking me, ‘‘Should I just quit paying my mortgage, and 

get foreclosed on?’’ I don’t think any of us in this room intended 

for this bill to cause foreclosures for people who happen to live near 

a river or near a mountain. So hopefully, we can find some solutions today, and certainly, at least, get the information out to help 

gentlemen and families like the one I just talked about. 

Thank you. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

Now, the gentleman, Mr. Westmoreland, is recognized for 11⁄2

minutes. 

Mr. WESTMORELAND. Thank you, Mr. Chairman, for calling this 

long overdue hearing. As a former homebuilder, I know the nature 

of flooding is always changing. Development, environmental conditions, and public policy at local, State, and Federal levels all contribute to either your flood risk or your flood mitigation. 

Mr. Chairman, the fundamental question posed by the Flood Insurance Reform bill is one of fairness. Is it fair for everyone to subsidize the insurance of a few? This is the question asked about the 

Obamacare subsidies, and today it is the same question posed by 

the flood insurance. 

To me, the answer is simple. Taxpayers should not continue to 

subsidize the flood insurance of those who live in flood-prone areas. 

It is not fair. I have heard from my colleagues about different scenarios with dramatically increasing premiums. Agreed, there are 

places in Biggert-Waters where tweaks need to be made to make 

the reforms work better. I am committed to helping the committee 

work on these areas where we can find agreement. 

But this committee must be committed to working to reserve the 

reforms to the Flood Insurance Program or risk a taxpayer bailout. 

Without these reforms, there will not be a Flood Insurance Program. We all know the NFIP owes the taxpayers approximately 

$30 billion. If reforms are not put in place, then as I mentioned, 

ultimately the taxpayers will be the ones to bail it out. 

This committee must continue to have strong and frequent oversight of FEMA’s implementation—putting it in force and holding 

FEMA accountable. With robust oversight of putting it in, this committee can preserve the reforms of the Flood Insurance Program 

and be fair and balanced to people currently in the program. 

Mr. Chairman, again, thanks for having this committee meeting, 

and before I yield back, I would like to make a unanimous consent 

request that a statement from my colleague, Representative Jack 

Kingston from Savannah, be entered into the record. 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

Mr. WESTMORELAND. Again, I yield back. 

7 

Chairman NEUGEBAUER. The Chair yields 11⁄2 minutes to the 

gentleman from Florida, Mr. Ross. 

Mr. ROSS. Thank you, Mr. Chairman, and thank you for holding 

this very important hearing. I also want to thank our panelist, the 

Honorable Craig Fugate, whom I had a chance to work with when 

he was Director of the Emergency Operation Center in Florida during the devastating 2004 and 2005 storm season. 

Florida has a unique relationship with the National Flood Insurance Program. Two out of every five homes covered by NFIP are 

located in Florida. And yet in Louisiana, New Jersey, New York, 

and even Texas have received more in claim payments than Florida, and I think this is due in part to our mitigation program and 

a little bit of luck as well. 

We contain so many policies for NFIP because we are a peninsula. Very simply, we have more risk. Our residents, many of my 

constituents, need affordable flood insurance. The NFIP is over $24 

billion in debt. The business model was flawed, and the program 

faced elimination. The Biggert-Waters bill addressed this problem 

and aimed to implement reforms to keep the program available. 

Unfortunately, the implementation of the Biggert-Waters program has proven problematic. I am hearing reports from my constituents of $15,000 increases in their flood insurance premiums. 

The communities in my districts are very concerned about the accuracy of FEMA’s mapping. Now is the time for discussions about affordability, private market risk, capacity, and the program’s premium collection. 

I hope today’s hearing will shed some light. While some might 

feel the government should wipe its hands of the problem, I would 

like to note that Congress created this problem. Congress allowed 

subsidized rates to continue for over 40 years. Congress passed the 

reforms that although are ultimately necessary, are very burdensome for some communities. 

Government created this problem. Now, we should work towards 

a solution, and I yield back. Thank you. 

Chairman NEUGEBAUER. Thank you, gentlemen. 

And now, we are going to recess and go over for Members to exercise their constitutional responsibility. We have a couple of votes. 

I will remind Members that just as soon as votes are over, please 

come back and we will resume. 

With that, we are in recess. 

[recess] 

Chairman NEUGEBAUER. The committee will reconvene. I will 

now introduce our first panel, which has one witness: the Honorable Craig Fugate, Administrator of the Federal Emergency Management Agency (FEMA). H. Craig Fugate was confirmed by the 

U.S. Senate and began his service as Administrator of FEMA in 

May of 2009. 

Mr. Fugate has been a dedicated public servant for nearly 2 decades, including serving as Director of the Florida Division of Emergency Management, as well as a distinguished emergency management career as a volunteer firefighter, a paramedic, and a lieutenant with the Alachua County Fire Rescue. 

Mr. Fugate, thank you for your public service. You are now recognized for 5 minutes to summarize your written testimony. And 

8 

without objection, your written testimony will be made a part of 

the record. 

And with that, welcome. 

STATEMENT OF THE HONORABLE CRAIG FUGATE, ADMINISTRATOR, FEDERAL EMERGENCY MANAGEMENT AGENCY 

(FEMA) 

Mr. FUGATE. Thank you, Chairman Neugebauer, Ranking Member Capuano, committee members, and Members of Congress who 

are sitting in on this hearing. 

In 1968, Congress determined that there was a need to provide 

insurance for a hazard that the commercial industry was no longer 

able to cover, and that was flood insurance. 

As part of that, to make flood insurance available to the public, 

one of the goals was to decrease and reduce future risk—the idea 

being, at the point we were going to start offering flood insurance, 

the other goal should be to decrease, in the future, the risks of 

flooding in this Nation. That would have hopefully been achieved 

if we were able to make sure that rates being charged were really 

changing behavior about how and where we built for the future. 

But as it is, we have a program now, after all those years, that 

has grown exponentially in exposure, and, at the same time, we 

continue to see growth and development in those areas in the country where, again, we still see our risk increasing. 

There is a lot of discussion about maps. There is a lot of discussion about how much are formal rates. But you can’t argue with 

this: we are $24 billion in debt. 

We currently have $350 million worth of cash on hand. We have the borrowing authority for another $6 billion. 

If you take all the other discussions away, that alone says that 

this program does not provide the funding necessary to cover catastrophic losses. And that exposure to catastrophic losses is what I 

think began driving the discussion as we look to reauthorize the 

Flood Insurance Program. 

We were very much supportive of getting flood insurance reauthorized for a 5-year period. This is something we heard from REALTORS®, from local communities, from our Write-Your-Own policies; they wanted to see stability. 

At the same time, I think there was a growing understanding 

that we need to set the right point of how much risk as a nation 

we can afford to subsidize and ensure that we are getting a return 

on that investment. 

So, Mr. Chairman, I want to break this down into a couple of 

segments and then I am ready for questions. 

Section 205 is the section of the Reauthorization of Flood Insurance Act that speaks to one particular type of property: secondary 

homes. I don’t think there is any question—I know there is some 

concern out there, but is there any question that we should be subsidizing somebody’s vacation home? 

So, I want to focus on primary homes, because I think this is the 

area about which we share a lot of concerns. And that is you own 

your home; we have a requirement to now begin moving to actuarybased rates, and in the case of update maps under our Section 207, 

the section requires that we increase those rates 20 percent over 

9 

a 5-year period until we are at the full rate, understanding that for 

a lot of homes and built infrastructure, it is going to be prohibitively expensive. 

And to give you an illustration of this, we use a term: base flood 

elevation. Base food elevation is what we say—a 100-year risk— 

which is not once every 100 years; it means a 1 percent risk each 

year—that we could get flood waters high enough to get in the 

structure. If you are built about that—just 4 feet above that, to insure $250,000 of home and $100,000 of content, is about $500 a 

year. Your base flood elevation—it is several thousand dollars. 

If you drop below that, there is a 25 percent increase for each 

foot you go down. So, for every 4 feet, you are doubling that policy. 

So, it is very likely if you have somebody whose home was built 

on a river or other coastal area where the base flood elevation 

could be as much as 8, 10, and in some cases even 16 feet above 

where they are built, you are going to see rates that are astronomical. 

Mr. Chairman, we want to work with Congress in looking at how 

do we set the right point to ensure we are not subsidizing risk 

going forward? 

But we want to look and work with Congress on how we look at 

affordability for somebody who is in their home now and how we 

look at affordability from a standpoint that is means-tested upon 

an ability in income, not just arbitrarily given to an entire designation as what the program used to do. 

We used to grandfather in the whole community, regardless of 

the ability to pay. So, we agree, and want to look at how we build 

in affordability. 

The last piece, Mr. Chairman, is there has been a lot of discussion about the affordability study. And as far as we have been able 

to determine with our attorneys and our reviews, there was a requirement to implement these programs concurrently—not waiting 

for a study to be completed. 

That would be a different direction Congress would need to give 

us to do. But we have already implemented Section 205 on secondary homes. Section 207, which would be about map changes, is 

still not implemented for current homeowners and will not be implemented until October of 2014. 

And again, this is an area, Mr. Chairman, in which we are ready 

to work with Congress. 

[The prepared statement of Administrator Fugate can be found 

on page 79 of the appendix.] 

Chairman NEUGEBAUER. I thank the gentleman, and now the 

chairman will recognize himself for 5 minutes for questioning. 

Mr. Fugate, in your testimony to the Senate Banking Committee, 

I think you testified that you felt like that the fund needed an additional billion and a half dollars to really get to where it was actuarially sound. 

And you also just mentioned that I think you had about $300 

million on hand. Kind of two questions here—if you have another 

significant event, you are in trouble, right? 

Mr. FUGATE. Yes, sir. We have approximately $6.4 billion left 

that we could borrow. And then at that point, we would exceed our 

10 

borrowing authority, and we would be required to come back to 

Congress to get more authority. 

Chairman NEUGEBAUER. So if Congress decides to change course 

here and move away from actuarially sound rates, that would begin 

to reduce the inflows. And how would that impact the fund? 

Mr. FUGATE. It is going to continue the challenge that we have 

an existing debt that if no new disasters happen, we were slowly 

paying down from Katrina. We had actually gotten down to about 

$18 billion—almost under $18 billion when Sandy hit. 

But we are still talking about many years to pay down this debt. 

What the increases really do is ensure that future losses are being 

paid for by rates collected and allow us to then keep growing—not 

grow the risk. 

But I think that given what we have now with the current debt, 

even with these increases you are not going to substantially see 

this debt retired any time soon. 

Because just the average payouts each year and the cost of operating this program, that overhead, precludes taking all of these increases and merely applying it to past debt. You have to use that 

for your future losses. 

Chairman NEUGEBAUER. One of the things that our committee 

has had is a lot of different Members come up to us with different 

scenarios. And some of those just really kind of turned out to be 

either misconceptions or rumors; some of them founded. 

What are the two or three most repeated misconceptions about 

the implementation of Biggert-Waters? 

Mr. FUGATE. I think one is on current homeowners. If I have my 

house—and again, about 20 percent of policies are subsidized; 80 

percent are already paying, calculated out, actuarially sound. So, 

80 percent of the policies see no change in this statute. 

The 20 percent that are currently subsidized—there is a very 

small percentage of secondary homes. They have already gotten 

their bills. They will get, by the end of this year—we started in 

January 2013—as of January, they will all have been moved to an 

actuarially sound basis. 

Where you do see the concerns is I own my home, the maps— 

they are talking about changing the maps. What is going to happen? And, as it has been in previous programs, as long as I am 

paying my policy, my premium, I have been getting that subsidized 

rate. 

But if we change the map and the community adopts that map— 

this is not a one-way street, FEMA works with the communities 

and the community adopts and enforces those maps, then their 

rates will start increasing 20 percent over a 5-year period until 

they reach the full level. 

That is not even phased to be implemented until October of 2014 

based upon the additional work it requires to implement that rule. 

So there are a lot of numbers flowing around, and there are a lot 

of questions out there. 

We can tell you what it will be if you got a secondary home. We 

have been doing those calculations. But for primary homeowners 

with map changes, that doesn’t change until October 2014. 

It is a 20 percent increase per year, so it is not all in the first 

year. And those have still not been finished as far as the impleVerDate Nov 24 2008 18:11 Jul 18, 2014 Jkt 086687 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\86687.TXT TERRI
11 

mentation. That is still in rule-making and the process to have that 

ready to go next October. 

Chairman NEUGEBAUER. One of the other things that I think was 

in your testimony was about some of these uncertified levees. And 

I know it is particularly interesting to some of my friends in Louisiana where they have a lot of levees, many along major rivers. 

And you are actually doing some work to give some partial credit, so to give some credit for a levee that may not be certified. Can 

you elaborate a little bit on that? 

Mr. FUGATE. Yes, sir. Previously when we looked at levees, if 

they were not certified to the standard that the Corps of Engineers 

was using, we would identify that as ‘‘without levee’’ and would calculate that as if there was no structure there. 

We agreed with many constituents who said we should at least 

be looking at how that would affect the flood risk. And so we 

agreed to come back and begin modeling as they were built, not did 

they make standard. 

So we didn’t zero them out as if they were perfect, but we did 

look at them for the protection they offered. We are currently doing 

pilots in Louisiana based upon that, which will require a rule 

change. But we are doing the pilot now to make sure we can get 

the right calculations and determine risk and have that now reflected in what they would be looking at for their risk and what 

those rates would be not on a certified levee, but on what is built 

there and how it would perform. 

Chairman NEUGEBAUER. And one last thing, you have a grant 

program to help with some of the mitigations. If some of the cities 

and States were to chip in, in partnership with you, on some of this 

mitigation, that would change some of the maps and could dramatically change some of the flood insurance premiums, could it not? 

Mr. FUGATE. Yes, sir. And we have had some States, most notably North Carolina after Hurricane Floyd did quite a bit of investment of their mitigation dollars to get the best map data. 

Previously, in the State of Florida, I worked to get better data 

for coastal communities to calculate storm surge. 

So, there are programs to get better data. We are also looking 

at the technology that is changing to speed up and reduce the cost 

of getting the best data while making sure that it is cost-effective 

and accurate in determining these risks. 

Chairman NEUGEBAUER. My time has expired. And now, the gentleman from Missouri, Mr. Clay, is recognized for 5 minutes. 

Mr. CLAY. Thank you, Mr. Chairman, and thanks for conducting 

the hearing. 

Mr. Fugate, we have heard reports of consumers being faced with 

multiple rate quotes for the same property. Can you describe the 

options available to a consumer in this situation? 

Mr. FUGATE. Again, sir, a lot of this is being done with preliminary information. We hadn’t even finalized until this year what 

those rates would be on new purchases that are not subsidized. 

The phase-in piece is still being worked on so that hasn’t even 

been finalized for existing homeowners who were looking at map 

changes where they would have to be phased-in. 

12 

And we have been working with ‘‘Write-Your-Owns’’ and other 

partners to make sure we get the accurate information out there 

when you do go and get your rate. 

But here is the challenge, sir. Unlike a lot of insurance policies, 

I cannot just look at where you are and determine your risk. I have 

to have an elevation certificate to know the risk. 

As I said— 

Mr. CLAY. Yes. 

Mr. FUGATE. If you are at base flood elevation, you are going to 

pay a certain amount, and you are going to get discounted for every 

foot you are above that, and those savings will be substantial. 

Likewise, if you are below that base flood elevation for that flood 

risk, the penalties and the increases can also go the other way and 

you will see increases in the rate far greater than what they had 

previously seen. 

Mr. CLAY. So you would agree that the premium rates serve as 

incentive or disincentive to locate a property at a certain level? 

Mr. FUGATE. Yes, sir. 

Mr. CLAY. And, up to this point, has it worked? Have there been 

less locations of properties outside of those levels or outside of the 

floodplain? 

Mr. FUGATE. In some cases, communities have made decisions to 

turn their most vulnerable areas into green ways and green space 

because the cost of construction would be prohibitive. 

And in other cases, they changed their construction techniques to 

build at a rate above base flood elevation. This is what the statue 

requires: If you are participating in the Flood Insurance Program, 

you have to build one foot above base flood elevation on the current 

maps. 

So we have seen in communities side-by-side homes that were 

built prior to the maps and homes built after the maps and the 

ones that were elevated after the maps did very well, and the ones 

that were not, flooded and people lost everything. 

And, again, I realize there is a cost to insurance and, in some 

cases, that cost is an issue we have to address. 

I want to go back to the one thing that flood insurance does do. 

It provides protection to people who lose their homes and their contents, and it is much better not to have flooded in the first place, 

then to deal with the consequences of a flood. 

Mr. CLAY. Okay. Let me ask you then, do you agree that it would 

make sense for FEMA to have an advocate that could provide a 

central point of contact for and work to educate policyholders about 

their individual flood risk and their options in choosing a policy, assist property owners through the map appeal process and improve 

outreach and coordination with local officials, community leaders, 

and Congress? 

Mr. FUGATE. Congressman, not only do I think it is a good idea, 

I am looking at that internally, what it would take to do that and 

what resources would be required. 

But, I agree, this is a very—from the standpoint of a consumer, 

since we work through a variety of Write-Your-Own insurance companies, I want to look at the best way to ensure we can get questions answered uniformly. 

13 

So we are taking that. I understand it is being considered legislatively, but we are looking internally is there a better way to provide that within the Flood Insurance Program? 

And so concurrent with your approach, and we want to work 

with the committee and staff on this, I want to look at this as well 

and see what we can do. 

Mr. CLAY. Okay. Can you explain the basis for FEMA’s decision 

to wait to implement the rate increases under Section 207 dealing 

with grandfathered properties? 

Mr. FUGATE. The delay is based upon the time it takes to implement the program. There was no delay that was built in other than 

this is a very complex process to move through. 

We implemented Section 205 first. We are now working on Section 207, but it is still something that we estimate we will be implementing, and the rate notices and the changes would be effective in October of 2014. 

So there was no intention to delay it other than the time it takes 

to implement this part of the bill. 

Mr. CLAY. Why was the decision made to move forward with the 

rate increases under Section 205 for subsidized properties? 

Mr. FUGATE. That was clear because there was not a requirement when you looked at existing homeowners who were receiving 

subsidies. Secondary homes were easier to identify and that was 

the first part of this. 

It is far fewer policies that we insure than the much larger pool 

of primary residences. 

Mr. CLAY. I thank the gentleman for his response. 

Chairman NEUGEBAUER. I thank the gentleman. 

I would say to my fellow committee members that we are going 

to try to adhere as much as possible to the 5-minute rule. We do 

have two panels, and we have lots of Members here today. 

And so if I start cutting you off, it is not because I don’t like you, 

it is just because we need to move on. 

Next, I recognize the vice chairman of the subcommittee, another 

gentleman from Missouri, Mr. Luetkemeyer, for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

And thank you, Mr. Fugate, for being here today. You are dealing with a very difficult issue that is affecting millions and millions 

of people. 

In my district, I represent the Lake of the Ozarks, which is a recreational area, retirement center there in central Missouri. It has 

more miles of shoreline than the State of California. That tells you 

how impactful it is, how large it is. 

And we have some significant problems with the flood maps. I 

know the premiums are what the discussion has been about so far, 

but the maps are really of a concern to me. 

I also have the Missouri River right through the middle of my 

district, and I have part of the Mississippi River. So, I have lots 

and lots of concerns with the mapping. 

I will give you an example: I have a lady who lives in a thirdfloor condo, that is the condo is on a 40-foot bluff above the level 

of the dam. She is 40 feet plus 2 floors above the dam, and yet she 

has a flood insurance policy. 

14 

This is rampant. We have thousands of people around the lake 

who are in this situation. Is there a way that we can meet with 

you or your staff, somebody who can sit down and look at this mapping and get it straightened out. 

I know what happens is every time a piece of property has to 

sell, they have to go get a new elevation statement, and it takes 

a lot of money and a lot of time for each individual property around 

that lake, and there are thousands of properties. 

Is there a way we can fix the maps without going through this 

process? 

Mr. FUGATE. I am more than happy to meet with you, but I am 

not sure you are going to like what I am going to tell you and I 

want to— 

Mr. LUETKEMEYER. Well, let’s talk about what we like then. 

Mr. FUGATE. When we do mapping, we map the risk based upon 

the area, not each structure. There are not enough resources to 

map each structure. And this has, again, been the challenge in 

doing maps. 

When you are setting an insurance risk rate, you set it based 

upon the area. And then, the elevation certificate tells you how 

high you are above or below that risk in that area and that sets 

your rates. 

The program has never been resourced, meaning funded, to do a 

structure-by-structure risk-base analysis. It has been based upon 

establishing risk for the community, for the neighborhood, for the 

block, and then you determine by that elevation certificate what 

that property’s risk is relative to insurance. 

That is an additional step and cost, and that is why, for WriteYour-Owns, this is not an easy policy to administer. There have 

been questions about what it costs and the percentages that they 

receive. 

Mr. LUETKEMEYER. Okay. My question is, would you be willing 

to have your staff or somebody like yourself meet with us and sit 

down and work through this? 

Mr. FUGATE. Absolutely. 

Mr. LUETKEMEYER. I appreciate that. Along that line, I know 

that there are a lot of other trade associations and groups out there 

that have some of the same concerns that I have. 

And I assume you have probably seen the letter to you dated November 15th from, I think, 16 different organizations requesting a 

meeting with you, a sort of flood-insurance summit. I don’t know 

if you are aware of it or not. But would you be willing— 

Mr. FUGATE. I have not received that. 

Mr. LUETKEMEYER. Okay. Would you be willing to meet with 

those groups? 

Mr. FUGATE. Yes, sir. 

Mr. LUETKEMEYER. Okay. I have a letter to be entered for the 

record, Mr. Chairman. 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

Mr. LUETKEMEYER. Thank you. I would appreciate that, because 

I know that everybody has some concerns about this, how it affects 

each different group—whether they are individuals or consumers or 

commercial folks; everybody has a problem. 

15 

I guess one question I would like to ask you as well is, I guess 

there are several different flood insurance companies that are getting into the flood insurance field. Are you aware of those? I am 

sure you— 

Mr. FUGATE. They have been in the field. 

Mr. LUETKEMEYER. Okay. 

Mr. FUGATE. We only cover $250,000. So if you have a jumbo 

mortgage, you have always had to go in the commercial, to write 

over that. 

Mr. LUETKEMEYER. Okay. The question I have then for you is, 

what is the difference in their approach versus your approach? 

Mr. FUGATE. We are insuring the greatest risk and the greatest 

liability at the least cost to anybody else, except for the taxpayer. 

They are writing the piece of the risk that is the least amount, and 

they can write it very affordably. 

Mr. LUETKEMEYER. I think I have an example here in this article 

from—looks like the Tampa Bay Times. There are a couple of different companies there in Florida, apparently, that are writing it 

from the ground up, and from the first dollar up. So what is the 

difference in their approach versus yours? 

Mr. FUGATE. Well, currently under—and this is something 

Biggert-Waters was also addressing, and is going through rulemaking, if you have a federally-backed mortgage, it still requires 

a National Flood Insurance policy. That is being changed to allow 

any commercial policy that provides the coverage to the mortgage. 

So it is no longer exclusive to NFIP, which I support very much. 

Where we have seen the private sector engage in is the area that 

I have been trying to push, getting to the point where we are not 

subsidizing rates, where they are not going to write the least-risk 

areas, and begin taking on more and more of the responsibility, 

and literally move them back to more of a capitalist, private-sector 

model of managing risk. 

So, I very much support that. Again, if they are able to write 

those policies cheaper, I think that is great for everybody. And as 

to the details of theirs and ours, it depends upon what they are 

writing. 

But right now, we are required to write the policies of service to 

federally-insured mortgages. And when that rule change occurs, 

that is going to open up that market. And I will be very interested 

to see how many more participants we are going to have in writing 

insurance below $250,000, for that first amount. 

Mr. LUETKEMEYER. Thank you very much. I yield back. 

Chairman NEUGEBAUER. Time has expired. The gentlewoman 

from California, Ms. Waters, is recognized for 5 minutes. 

Ms. WATERS. Thank you very much. First, let me—Mr. Neugebauer, you asked about participation by cities or States, or local 

communities in mitigation. Right now, there is a cap of 50 percent. 

Is that right, Mr. Fugate, of ability of a local entity to participate 

in mitigation? 

Mr. FUGATE. It depends upon which program. I am not sure if 

that is in the flood insurance buyout program. The other programs 

are 75 percent Federal, 25 percent State and local. 

Ms. WATERS. Why is there a limit on the ability for local communities to help themselves with mitigation? 

16 

Mr. FUGATE. There is one area I am familiar with, and that is 

this is a rule-changing, we support it, that if they use their money 

to do certain work, we had not recognized that before. And as we 

have been briefed on it, we want to change that. 

So if a community is putting up their money, we recognize that, 

and do not preclude that from being a tool to factor in the mitigation. 

Ms. WATERS. We are going to attempt to change that in the legislation, the bipartisan, bicameral legislation that we have put together. But my question is, none of us are expert in this business 

of the Federal Flood Insurance Program. But we don’t get you from 

FEMA initiating changes that make good sense. 

If you knew, and you know that makes good sense for local communities to be able to participate in their own mitigation, even if 

it is 100 percent, why haven’t you come to us and recommended 

that? 

Mr. FUGATE. I wouldn’t be able to answer that. I would have to 

go back to staff. But I do know that in the one case where we did 

have this, we found a workaround for a community to allow them 

to use those funds. It was tied back to some rules that, quite honestly, until I got briefed on it, I hadn’t heard of before. 

Ms. WATERS. Let me just go on, on this same vein of questioning. 

There was a pre-owned property. It was purchased in 2011 by a 

Pennsylvania couple as a future retirement home. Upon hearing of 

the changes in the Biggert-Waters Act, the owners sought an elevation certificate, and learned that the full-risk rate of the home 

had increased from $3,300 to over $59,000. Even with the phasein of rates, this sharp increase has made the home unaffordable, 

and the home is now up for sale. The owners fear that they will 

not be able to sell the home because of the poor risk rate. 

When your people began to see rates increase like this to an unreasonable, outrageous amount, why didn’t you come to us and inform us that something extraordinary was going on, and come up 

with a fix to help us with this? You are the expert. 

Mr. FUGATE. We have been working on this issue. And as we 

come across this, we have been trying to do our due diligence. It 

was something the Administration went on record that before we 

had even began calculating this, we were concerned about—there 

was no affordability provision in this. 

Ms. WATERS. If you were concerned about no affordability, why 

didn’t you find a way to do the affordability study? 

Mr. FUGATE. The affordability study, again, based upon the direction that we had when we approached the national academies 

to contract with them, they informed us that the amount of funds 

and the timeframes would be insufficient, and they would only be 

able to begin part of that study. 

We went back and notified staff that was the response. But because the legislation was fixed at a certain price— 

Ms. WATERS. Did you come back to this committee to ask for 

some help with that? Now, we are fixing it in the legislation, that 

is the bicameral, bipartisan legislation, and we are putting some 

money in there for an affordability study. 

But you didn’t come back here and tell us any of what you are 

telling us now. Why didn’t you do that? 

17 

Mr. FUGATE. Again, my understanding is staff were communicating with staffs. I apologize if that did not happen. 

Ms. WATERS. This issue requires leadership. And let me just say, 

all of the harm that has been caused to thousands of people across 

this country who are calling us, who are going to lose their home, 

who are placed in this position, it is just unconscionable. 

That was not the intention of Biggert-Waters. And I am absolutely concerned that with your knowledge, with FEMA’s knowledge, that you should be talking to us more, helping us to understand how to best be of assistance, and have a program that works. 

Mr. Chairman, I yield back the balance of my time. 

Chairman NEUGEBAUER. I thank the gentlewoman. And I will 

just take a little bit of your time. Section 100219 of Biggert-Waters, 

‘‘permits states to invest in unlimited additional funds in mapping 

by removing the limitation that states can only contribute up to 50 

percent of the cost—’’ 

Ms. WATERS. We can’t hear you, Mr. Neugebauer. 

Chairman NEUGEBAUER. I’m sorry. Basically, in Section 100219, 

it says that ‘‘states can invest in unlimited additional funds in 

mapping by removing the limitation that states can only contribute 

up to 50 percent.’’ 

So in Biggert-Waters, some of that was addressed. But I think 

the gentlewoman does make a good point in as far as building infrastructure, if we have limitations on infrastructure that States 

and local communities can build, we probably need to address that. 

So, thank you for bringing that point up. 

I now yield 5 minutes to the gentleman from Florida, Mr. Ross. 

Mr. ROSS. Thank you, Mr. Chairman. I apologize for the hoarseness in my voice. I lost it on a 4th-and-18 touchdown ‘‘Hail Mary’’ 

pass over the weekend for my Auburn Tigers. 

Mr. Fugate, as I said in my opening statement about Florida 

being a donor State, and it just seems a little contradictory, could 

you explain why that is? Two out of five policies are written in 

Florida, yet they don’t lead to claims. 

Mr. FUGATE. It is because we have been fortunate that we have 

not had the large-scale flooding event. Florida sees itself as a donor 

State. But they have also have to understand that they also have 

some of the biggest risk. 

If a category 2, category 3 was to impact Miami-Dade County with a storm surge, you are talking anywhere from $2 billion to 

perhaps as high as $4 billion in payouts from one event. You go 

county by county, you see that kind of exposure. 

So although the impression is we have paid more into the program than we see premiums paid out, it is based upon the risk. 

And again, I caution that we just don’t make the assumption, because we haven’t had the payouts, risk isn’t there. I think it gets 

back to the original issue, is the affordability in this from the existing homeowners? 

Mr. ROSS. With regard to the Biggert-Waters implementation, do 

you think we should delay it for any period of time with regard to 

the rate adjustments, or go forward? 

Mr. FUGATE. I think I would be very measured in delaying this. 

Particularly, what we have looked at is in Section 207. This would 

be the section that if a map change occurred, you would lose your 

18 

preferred risk, or your preferred rate, and it would have to be increased. 

But I would also caution that what we have found before when 

we did this for everybody is we didn’t change the outcome. What 

we basically did was the delays never went forward, and we ended 

up subsidizing risk. 

We would like to work with Congress to make this actuariallybased, but also if we are going to give any preference to reductions 

or affordability, that it be means-tested. 

Mr. ROSS. And with regard to the study that you have been 

charged with having, do you think it would be wise to wait until 

such time as we have had the results of the study performed by 

FEMA, or should we— 

Mr. FUGATE. I think for Section 207 it is the area that has not 

been implemented yet, it is the one that there is a lot of work to 

be done on affordability. I would say that section—most of the sections of 205 are implemented. I don’t think we could pull back on 

secondary homes. 

But there is another issue about when—your State has had 

this—we have had escrow accounts that didn’t service the policies, 

and they lapsed, and they immediately went to the new rate. I 

think there are some technical issues there. 

But the affordability—and what makes this complicated is it goes 

back to the mapping question. You almost have to look at enough 

structure by structures to see how many people are above or below, 

and at what levels, to determine how many of the extreme cases 

there are versus, ‘‘This is affordable.’’ 

Mr. ROSS. Thank you, Director. I apologize. I only have a couple 

of minutes left. With regard to the private market, you testified 

you are woefully undercapitalized for anything that is going to happen. 

Is there a sufficient capacity in the private sector to meet the 

needs of the flood insurance liability of this country? 

Mr. FUGATE. My sense is—and I cannot speak for the insurance 

companies—if we change the regulation that requires you to have 

flood insurance to back a federally-insured mortgage, I don’t see a 

lot of private-sector insurance making up the difference for the 

highest risk, but I do think as we saw in Florida with wind pools— 

Mr. ROSS. Exactly— 

Mr. FUGATE. The government is going to have some responsibility in the— 

Mr. ROSS. And if we use some creative means—up in wind pool, 

we did the percent deductibles, which worked. I think Mr. Luetkemeyer talked about surplus lines insurance coming in there. 

There are some creative opportunities, not only that, but there 

is also an opportunity because this is a government-created problem, but to do glide path in terms of the transition, the increase 

in the rates so that we get a market going while we are also allowing for the government to be the backstop. 

Now, let me quickly ask you, are you familiar with agreed value 

flood insurance policy proposals, where you have—it is almost like 

a scheduled injury if you were in liability, but in terms of flood insurance it would be a scheduled event using the BFE, the Base 

19 

Flood Elevation, to sell policies that are supported by insurancelinked securities such as cat bonds? 

Mr. FUGATE. No, but I would be interested in hearing about it. 

Mr. ROSS. Good, because I would like to have the opportunity to 

sit down and talk to you about that. 

I think what we are trying to do is to provide not only some education as to how to mitigate against these flood zones, but also to 

encourage a private market to come into play so that they pool 

some of their risk and take it away from you. 

Lastly, I just want to talk about mitigation. Florida has had a 

great mitigation program. What can we do to foster more mitigation in low, in flood zones? 

Mr. FUGATE. It goes back to the maps. The better the data, the 

better we know where to make our investment decisions, where 

and how to build—I am not at all saying we shouldn’t build just 

because there is flood risk— 

Mr. ROSS. I agree. 

Mr. FUGATE. —but I do know we can build in a way so— 

Mr. ROSS. To withstand. 

Mr. FUGATE. —that people don’t lose their homes when there is 

a flood. 

Mr. ROSS. Exactly. 

I appreciate that, and I yield back my time. 

Thank you. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Massachusetts, Mr. Capuano, the 

ranking member of the full Financial Services Committee, is recognized for 5 minutes. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

And thank you, Mr. Administrator for being here. 

Mr. Administrator, every time that FEMA goes into a disaster 

area, do you know what you are getting into every single time? 

Mr. FUGATE. No, sir. 

Mr. CAPUANO. So, no on a regular basis, probably every single 

time, when you go in some place, you are well-intended, you know 

what you want to get done, but when you get on the ground, you 

have to be flexible. 

Is that a fair statement? 

Mr. FUGATE. Yes, sir. 

Mr. CAPUANO. That is how I feel about this whole issue. 

We passed a bill a couple of years ago, because I agree with the 

policy and the philosophy about trying to get to an unsubsidized 

basis. I think it is a good idea. But we also put the affordability 

study in there, because we weren’t sure how all this would be impacted. And to be perfectly honest, for me, the policy, the philosophy, with you 100 percent. 

But, I don’t live in an ivory tower. 

I live in the real world, and when I start getting phone calls from 

people saying, my insurance is going up 5,000 percent—and it is 

not just one person—we have a responsibility to react. And my definition of a good reaction is to say, pause, deep breath, what is 

causing this, let’s take a little break, figure out what happened and 

if we want to do something about it, which is why we are here 

today. 

20 

I think that is exactly what we are doing. 

I think that we should have done the affordability study before 

we implemented any of these prices. And anybody who told you 

that they couldn’t do it, you should have talked to us. 

Okay, it has happened. We are here today. 

I want to be really clear, I strongly disagree with you about second homes. I strongly disagree with the legislation that has been 

put forward that exempts small businesses. A lot of people own second homes. They are not all Bill Gates. Most of the second homes 

owned in New England are trailers, small little houses—many of 

the houses that are impacted used to be second homes. 

Florida, the Gulf Coast, and North Carolina are full of second 

homes mostly owned by middle-income people struggling to get 

that, and to say that they should be thrown out, in my opinion, is 

an inappropriate response, an inappropriate action. 

It doesn’t mean that in the long term, we may decide to do something different with them, but today not only will you kill those 

second home owners, you will hurt the economy that they are in, 

because most of those homes are located in places where the entire 

economy is revolving around those second homes, including the 

small businesses that service them. All of whom are going to get 

massive—or potentially, will get massive hits under this, all of 

whom deserve the same pause button and then a re-attack on the 

issue. 

I don’t think you will find anybody here today who argues or will 

argue with the policy of trying to get off subsidies. I totally agree. 

How? To me, that is what this hearing should be all about. How 

we got here, we get it, okay. It is done. 

What do we do? I would argue that we need to pause, and I just 

want to hear from you, do you agree or disagree—now again, not 

as the Administrator, because you have a job to do, I get it, you 

are just doing what the law says as you read it—but if you were 

me, would you be asking to hit that pause button for a little while 

so we can take a deep breath? 

Not to stop new maps. 

Not to stop increases. 

Not to stop actuarial-based insurance. 

But to see how it impacts real people. 

Would you hit that pause button or would you just pile forward? 

Mr. FUGATE. I think the affordability piece is the part I am most 

concerned about, and I would like to have the time to work on that 

for existing homeowners. 

I also know that communities have been through this before. 

They have faced these same issues. They rebuilt differently. Their 

economies came back. Not everybody got to come back, but the 

communities came back. 

This is not new. We have been through this with Hurricane 

Hugo, Hurricane Andrew, and Hurricane Katrina, and we are now 

going through it with Sandy. I have been through it in my home 

State of Florida, in numerous small communities that were wiped 

out that, faced with the Flood Insurance Program, thought they 

would never come back. 

And this is going to be a true statement: For some people, they 

will not be able to afford to come back because of these requireVerDate Nov 24 2008 18:11 Jul 18, 2014 Jkt 086687 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\86687.TXT TERRI
21 

ments. It does not mean that communities have not come back and 

thrived with the new requirements and are more resilient and 

more likely to be able to survive the next event. 

Mr. CAPUANO. None—I don’t disagree with a single word you just 

said, with the sole exception being those are specific areas—this is 

country-wide all in one fell swoop, which is again—I am not arguing—I may come to the conclusion that what you are doing is absolutely necessary, that it is an unfortunate necessity. 

I am simply saying, we are there now—I won’t speak for anybody 

else, but for me, to a great surprise that these numbers came out 

the way they did. I am not arguing against the maps, that is fine. 

None of that bothers me. 

What bothers me is that we are acting as if a $5,000 or $10,000 

cost to an average homeowner is nothing. And, it is a lot. It is a 

lot to ask. 

And again, if we all decide as a Congress, and you as the Administrator, decide, well it is necessary for the greater good, fine. I 

don’t think anybody here, certainly not me, thought that we would 

be seeing these kinds of increases. 

So that being the case, my time is up, and I appreciate the chairman’s— 

Chairman NEUGEBAUER. The gentleman from Virginia, Mr. Hurt, 

is recognized for 5 minutes. 

Mr. HURT. Thank you, Mr. Chairman. 

And Mr. Fugate, I thank you for appearing before our committee. 

I apologize for missing your opening remarks. But I wanted to 

first of all talk a little bit about the mapping process, what if there 

are those who would like to delay provisions of the Biggert-Waters 

Act, what is the timeline for getting the mapping done to a sufficient level that takes all that into account? 

What is the timeline? 

How long does that take? 

And is there anything that we can do to assist in expediting 

that? 

Mr. FUGATE. Again, with mapping and updating maps it is the 

requirement of the funding to update the maps, the prioritization 

of that, and to the detail. And I explained this earlier, but I think 

this is one of the challenges with maps. A map update does not determine risk house by house, structure by structure. It determines 

what the flood insurance rate is for an area. And it still requires 

further work to get an elevation certificate to determine based 

upon that risk where you are at. 

So more funds to get more work done, but we are having to go 

back and re-study and do other work based upon challenges. If we 

are going to continue to do this, if we wait until all the maps are 

updated to a level that everybody agrees on, that it will indefinitely 

delay implementation. 

Mr. HURT. Is there a reasonable timeframe that you can forecast 

for that to be done? 

Mr. FUGATE. When I was still a county person, they began modernization and updating maps. This is going to be a multi-decade 

process as these are not static situations; there is change that is 

involved. We have to continue as the science gets better. 

22 

One of my hopes is we can actually speed up—with some of the 

new technologies, as they are proven—this is one of the things that 

Congress directed us to do is a technical map advisory committee 

to look at not only our process, but also adapting new technology 

to get more accurate readings at a lower cost. 

Mr. HURT. Second question, if we were to delay the implementation of these rates—the increased rates that we are seeing, how 

long would it then take to get this program into fiscal solvency? 

That seems to me to be the big question at a time when this program is $24 billion underwater, how long will it take? 

Mr. FUGATE. Until Hurricane Sandy hit, we had managed to pay 

down a little over $2 billion worth of the premium out pay from 

Katrina, so a very long time. I just—I can’t even give it to you, because you have to factor in, do you get any new events, and what 

your average events are. 

But, we were not moving the needle very much on Katrina, and 

trust me, if we did not get the favorable interest rate the Treasury 

gives us, we wouldn’t even be able to keep up with interest payments. 

Mr. HURT. I guess a follow-up question—sort of a big picture 

question is, if we were to go in the direction of some sort of delay, 

isn’t it a reasonable argument that we are actually just delaying 

the inevitable? That we are not really fixing anything, we are just 

pushing it down the road, pushing the pain down the road? 

Mr. FUGATE. We would be back to where we were before Sandy, 

and it is a balancing act towards—my biggest concern is, how do 

I deal with the folks who are facing this now who are in their 

homes in some way that makes sense that we are not putting people out of their homes who can’t afford it, but more importantly, 

how do we not continue increasing the risk going forward? 

This program has always grown a risk greater than our ability 

to afford it. So we have to say at some point that we cannot subsidize going forward, and then we have to look at our built infrastructure and ask, what is the best path forward to move to where 

the market—preferably the private sector—can insure that risk, 

and we narrow down the exposure to the taxpayer to only that risk 

that cannot be borne by the market, and through no other means 

can people stay in their homes. 

And then, we are going to have to look at that—what makes 

sense for the basis of that. 

Mr. HURT. Last question, really quick—my time is almost expired—if we were to implement some sort of delay, how would the 

NFIP and the Write-Your-Own companies—would that be a problem administratively for them to make a change that has already 

been implemented? 

Mr. FUGATE. I don’t—in Section 207, which would be the existing 

homeowners if we change maps, I think that would have the minimal impact, because that does not occur until next year, October 

at the earliest based upon what we think we are going to be able 

to implement by then. Where it would probably affect immediately 

is people who have already gotten a change where they had bought 

new property or they had a lapse and their rates went up, or they 

are trying to sell their homes. 

23 

And then again, on secondary homes, those notices already went 

out, so we are in the final part of that billing cycle. So if we are 

going back to secondary homes, that has already changed, that 

would be a big undertaking. 

Mr. HURT. Okay, thank you. My time has expired. 

Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

Just a 5-second question. 

Are you doing any satellite and aerial mapping now? Or are you 

still doing it on the ground? 

Mr. FUGATE. We are using a LIDAR, which is a laser. That is one 

of the tools to get the digital elevation maps, as well as ground surveys. 

But there are some really interesting tools that are coming along 

the line that are giving very high resolution, including the structures, at a much lower cost. And this is one of the things that we 

want to look at. 

It would increase—we could then map by structure at a much 

lower cost. But there are emerging technologies that are changing 

so fast that we want to get that into our system to make the maps 

more accurate. 

Chairman NEUGEBAUER. Thank you. 

I now recognize the gentlewoman from New York, Ms. Velazquez, 

for 5 minutes. 

Ms. VELAZQUEZ. Thank you. Thank you, Mr. Chairman. 

I represent the seventh congressional district and it is a sea 

coastline in New York which has been badly impacted by Sandy. 

And I have a question about how do we incentivize mitigation, because in the long run, it will affect affordability. 

Many private WYO insurance plans do not allow homeowners 

and businesses to use claims to improve flood resiliency through activities like increased base elevations, flood-proofing basements or 

raising electrical controls above flood levels. 

This seems counterintuitive to what many might see in future 

payouts. What is FEMA doing to ensure that NFIP and WYO 

claims might be used to improve property resiliency for future 

floods? 

Mr. FUGATE. It won’t go through the Write-Your-Owns, because 

their obligation is to pay actual damages out, so there wouldn’t be 

any additional funds to mitigate. 

But you have also authorized us in previous flood insurance authorizations to use money from the program on repetitive loss to 

either elevate or buy out property so that the owner can have the 

option to sell out and not have to rebuild, or we can help elevate 

it. 

We also work very closely with the Small Business Administration. They have a program where they can make loans available to 

rebuild, but also mitigate. And then we use our hazards— 

Ms. VELAZQUEZ. Are you talking about the disaster loan? 

Mr. FUGATE. Yes. Yes, ma’am. 

Ms. VELAZQUEZ. Let me tell you—I did a report on the disaster 

loan through the SBA; 74 percent of those disaster loans were declined. 

Mr. FUGATE. And— 

24 

Ms. VELAZQUEZ. A lot of those businesses that were waiting for 

that help are not there anymore. 

Mr. FUGATE. So, again, they offer that. The additional hazard 

mitigation dollar States get can be used. And I know that both in 

New Jersey and New York, they are looking at those areas to do 

elevations and buyouts to create more barriers. 

There are programs. But the Write-Your-Own—they are servicing actual losses, the idea being these are the damages that have 

to be repaired to bring the home back up to code so it services the 

requirement of the mortgage. 

Ms. VELAZQUEZ. My next question is about the inability to use 

private insurance claims to assist with future flood resiliency, 

which has made it difficult for New York homeowners to comply 

with CDBG’s disaster relief-based elevation requirements for Sandy 

recovery. 

How does FEMA plan to resolve this conflict? 

Mr. FUGATE. I would need to work back—these are with the 

Community Development Block Grant dollars? 

Ms. VELAZQUEZ. Yes. 

Mr. FUGATE. We were working with Secretary Donovan. Part of 

the present direction with the Rebuilding Task Force was to get to 

these very types of issues. 

We are hoping that we are working complementary with the 

Community Development Block Grants and our mitigation dollars 

to increase the amount of funds available. But I will be more than 

happy to take this back and work with Secretary Donovan on it. 

Ms. VELAZQUEZ. Thank you. 

Thank you, Mr. Chairman. Mr. Chairman, I would like to ask for 

unanimous consent to include in the record two testimonies that 

were submitted by constituents of mine who were impacted by 

Sandy. 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

Ms. VELAZQUEZ. Thank you. 

Chairman NEUGEBAUER. The Chair recognizes the gentlewoman 

from West Virginia, Mrs. Capito, for 5 minutes. 

Mrs. CAPITO. Thank you, Mr. Chairman. And I want to thank 

our witness—he has been very good. 

I alluded in my opening remarks to a homeowner—first of all, I 

wanted to ask a unanimous consent to submit for the record the 

news article that discusses the case of Richard Holmes with the 

flood insurance. 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

Mrs. CAPITO. Okay, thank you. 

So, Richard Holmes bought his home when he was sort of in this 

not knowing that he had any idea that he was going to have a 

$12,000 flood insurance premium on a $160,000 house because the 

regulations, I believe, hadn’t been formulated in time. 

You were shaking your head when I described it earlier. How can 

we assist somebody like this and—I don’t know what to tell him 

to help him. I did tell him to keep paying his mortgage, however. 

Mr. FUGATE. Again, I don’t have the—if I had the answer, I 

would have already done it. 

This is one of the things, and again, I have talked to the chairman about, is we want to make sure that we have affordability adVerDate Nov 24 2008 18:11 Jul 18, 2014 Jkt 086687 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 K:\DOCS\86687.TXT TERRI
25 

dressing as means-tested—that not just anybody can get a subsidized rate. 

But there was no provision to do that. And so, what we found 

is that when this regulation went into effect, if you bought your 

home with that designation that has changed or had changed previously, there was no grandfathering in. 

And so, it is a small group, but it is a group that is being hit 

very hard. It is affecting—you are going to hear from REALTORS® 

and everybody else about how this is affecting closings right now— 

Mrs. CAPITO. Right. 

Mr. FUGATE. Because the way it was implemented, once it went 

into effect, when you change your status, you go to the full rate. 

So, if you drop your policy or you are selling, the buyer goes to 

the full rate. There is no phase-in. The other parts of the bill had 

phase-ins. 

Mrs. CAPITO. The other thing I was surprised to learn from him 

was that there was no notification at his closing that this could be 

a possibility. Does that gel with what you are hearing across the 

country? 

Mr. FUGATE. What I heard—and, again, I am reading news articles similar to what you saw where the first time somebody realized this is—because generally, when you go to closing, you have 

to go find out what the insurance is and you have to certify your 

insurance in order to send the mortgage. 

When they went to the insurance company to get that was when 

they found out. Because they usually were doing this—‘‘What were 

you paying? That should be about my—I can afford that.’’ 

Mrs. CAPITO. Right. That is what happened to him. 

Mr. FUGATE. Each designation—and this is, again, you are going 

to hear from REALTORS® and others—when people go get that, 

it is shutting down the deal, because what somebody was paying 

in the past is not what you are likely to be paying in the future 

if you are substantially below that base flood elevation. Now, if you 

are above that, it is less of an issue. But it is those homes built 

prior to data or below flood elevations—and, again, it about doubles 

for every 4 feet you are below that. 

Mrs. CAPITO. Right. I think in his case, he knew he was purchasing a home in the floodplain. That was designated—pre-designated. He just was unaware at closing, after he closed, that this 

was going to be the price. 

So, now he is looking at—really, his flood insurance premium is 

going to be more than his mortgage. And I don’t know if maybe the 

solution is to grandfather folks like that in, or try to hold the premium to the value of the house. 

He is not sitting at the base of a river—we have plenty of those, 

as well, in our State. And I don’t know the flood elevations. But 

he knew he was purchasing in a floodplain area designated. That 

wasn’t the issue. 

The issue was he is already into this contract and now he doesn’t 

know what to do because it is unaffordable for him. 

Ms. WATERS. Will the gentlelady yield? 

Mrs. CAPITO. Yes. 

Ms. WATERS. You should be able to tell your constituent that 

there is a bipartisan, bicameral piece of legislation that would force 

26 

them to do the affordability study and the review and everything 

that we were doing would take 4 years. 

So, this is retroactive and that he should not have to pay that 

increased amount. After the affordability study is done and the 4- 

year period of time, we will have recommendations that will help 

us to determine what makes good sense and what is fair. 

Give them the hope and the understanding that we are working— 

Mrs. CAPITO. Right, and I— 

Ms. WATERS. To do this. 

Mrs. CAPITO. If I could reclaim my time, I am trying to hear his 

issue and trying to help him, as well. 

But then, if you look at the whole neighborhood, then you look 

at property values. Who is going to buy a house at $150,000, no 

matter if it is 4 years from now or next week, that has a $12,000 

flood premium? That is unaffordable. 

So does the—and then you look at the retiree who owns her own 

home. She is all by herself. She is thinking if she has to go into 

a nursing home someday, her only asset is her home, and the value 

of her real estate is plummeting because of this issue. Then, we all 

pay. So, there are all kinds of residual issues around this one issue. 

I appreciate it, and I am out of my time. Thank you. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

And now the gentleman from Missouri, Mr. Cleaver, is recognized for 5 minutes. 

Mr. CLEAVER. Thank you, Mr. Chairman, and Ranking Member 

Capuano. 

Most of my questions have already been raised concerning the affordability study. But to preface the reason for the question I will 

ask, I am from Kansas City, Missouri, and contrary to what you 

might believe, we are surrounded by water. 

The Missouri River is the longest river in North America. It is 

the longest tributary to the Mississippi—2,400 miles. And in fact, 

the word Missouri means, ‘‘those who paddle in wooden canoes.’’ 

So, water is an issue. And now that I have established that I am 

not from Kansas, let me just find out—in your statement, you said 

that you would begin issuing guidance to insurance agents in 

March. 

Mr. FUGATE. Yes, sir. 

Mr. CLEAVER. Did that happen? 

Mr. FUGATE. Yes. We have been working with the Write-YourOwns. In fact, we have continued to work on increasing that and 

more training as we have found more concerns and issues. 

But this program—and this is part of the reason why it wasn’t 

implemented immediately on the date of signing. We had to implement, train, communicate with Write-Your-Owns, develop the rules 

and implement this. So, this is an ongoing process. 

Mr. CLEAVER. Were prospective homeowners warned about the 

changes in their flood policies? 

Mr. FUGATE. Again, I get this question, and I guess if the question was, has FEMA notified directly all policyholders, the answer 

is we do that through the Write-Your-Owns. And it— 

Mr. CLEAVER. Through what? 

27 

Mr. FUGATE. Through the Write-Your-Own—the people who are 

servicing the policy. And it depends upon their status. 

The only change that we are seeing with this, again, is about 20 

percent of the policies. That is a big number. 

But for most policies, this has not really changed anything that 

they have. It is only those people who were getting either a subsidized risk, which is about 20 percent, or they have a map revision. 

And so, those notifications were being based upon when people 

were coming up for renewals if that status changed. So, if I went 

to buy a policy for the first time, that is when I would find out. 

Mr. CLEAVER. So, what—you couldn’t get us the number of— 

Mr. FUGATE. No, sir. 

Mr. CLEAVER. —houses? Okay. 

I yield back the balance of my time. Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, the gentleman from Ohio, Mr. Stivers, is recognized for 

5 minutes. 

Mr. STIVERS. Thank you, Mr. Chairman. I appreciate you holding 

this hearing. And thank you, Mr. Fugate, for coming and explaining the current status of where we are with the Flood Insurance 

Program. 

You have said a couple of times that 80 percent of the policyholders see no increase, and that of the 20 percent, those folks are 

either impacted because there is a change in the flood map, or their 

subsidy is reduced. 

So of those 20 percent, how many of those folks are being shifted 

immediately to full risk-adjusted rates, and are there any—what 

kind of hardship concerns are you hearing from those folks? 

Mr. FUGATE. As was pointed out, if you have a secondary home, 

we eliminated that, and— 

Mr. STIVERS. But I want to try to understand, of that 20 percent, 

how big is that? 

Mr. FUGATE. It is not a very big percent, but they started as of 

January 1st of this year. Their rates will be going up 25 percent 

of what they were paying. 

It is an extended horizon, because they don’t do it like you would 

think, 25 percent in 4 years. It is 25 percent of what they were 

paying, and it goes up 25 percent until they get to that level. 

If you buy a new policy, it is in effect now. So if I haven’t had 

a policy before, and I am buying, I am going to pay the full rate. 

If I had a lapse in my policy, I didn’t make the payment, it went 

up. And if I sold my home, and buying it, it went up, or I had a 

repetitive loss, which we have not seen that yet. But if I had repetitive losses, one of the concerns—we have had properties that get 

flooded out every couple of years, they never had to pay more. 

But for everybody else, it has not changed yet, and won’t change 

until either maps are updated, or they lapse their policies. 

Mr. STIVERS. So you are saying, essentially, that the only two 

groups of people who have seen an adjustment to a full risk-adjusted rate are people who have allowed their policy to lapse for 

nonpayment, or for some reason, it lapsed, or a brand-new home 

that didn’t have any coverage before? 

Mr. FUGATE. Yes, sir. 

28 

Mr. STIVERS. Okay. So if Congress were to pass the GrimmWaters bill, or whatever name we are calling it, or some subsequent bill, and then FEMA were to give the consumers and the 

Write-Your-Own folks some kind of direction regarding those 

changes, it will have been almost a full year since this whole process started. And so, almost every impacted policyholder would have 

seen a bill already. 

How do we fix the confusion related to the fact that they will 

have already at least seen a bill, or had a bill due, or some of them 

will have already started to pay bills? What kind of confusion 

would those time lapses create, and is there a way to get around 

that? And I am not saying that is a reason not to do it, but— 

Mr. FUGATE. It would be, again, something we are going to have 

to look at. It would really depend upon how Congress structured 

any new changes, and what those requirements were. 

Knowing that this is a much smaller population than the overall 

number of folks who are currently receiving subsidized risk, I 

would have to really go back to staff and go into numbers of people 

that this would impact, what it would take, depending upon Congress’ direction to address? 

Mr. STIVERS. And you have read the proposed bill? 

Mr. FUGATE. I have staff reading through it. I haven’t had a 

chance to read it myself. We are still working through the—there 

are several, but we are looking at the different bills to do staff 

analysis. 

Mr. STIVERS. So the way I read it—and maybe I am not right— 

has your staff told you at what point, if this bill were to pass, we 

would start to move to risk-adjusted rates? Would there be almost 

a 4-year lag before we actually move to risk-adjusted rates? 

Mr. FUGATE. My understanding so far, what staff analysis is, is 

that there would be a delay to complete the affordability study, and 

implement those back to Congress with rules to implement that, 

and then the implementation timeframe of that. 

And based upon our conversation, the National Academy of 

Science has advised that it would take several years to work 

through all of the affordability studies. And then past that, you 

would be looking at how would you implement that, recommendations that either we have authority to implement, or we require additional direction from Congress. 

Mr. STIVERS. So you look at it the same way I do, that it could 

actually take years to actually move toward risk-adjusted pricing 

under this bill? 

Mr. FUGATE. Based upon my understanding, yes, sir. 

Mr. STIVERS. I think the bill is well-intended, and I want to try 

to make sure that folks who are potentially seeing huge spikes all 

at once, we need to try to look out for that, and try to phase things 

in the best we can. But we do need—I believe we need to move our 

Flood Insurance Program to actuarially sound rates. 

That is one of the problems with government pricing risk, is government doesn’t do a very good job. So I guess now that my time 

is up. I will yield back. But thank you for your time. 

Chairman NEUGEBAUER. I thank the gentleman. Now, the gentleman from Connecticut, Mr. Himes, is recognized for 5 minutes. 

29 

Mr. HIMES. Thank you, Mr. Chairman. And thank you, Administrator Fugate, for being here. 

And I would be remiss if I didn’t say thank you for visiting my 

district in Southwestern Connecticut just over a year ago when 

Sandy came through and did a lot of damage. It was great to see 

you then, and your people. It has been great not to see you since 

then in my district. 

I wonder, absent the affordability study, I am curious if we can 

put at least some sense of magnitude on the challenges that are 

facing the stories that we have heard today. 

If I am reading your testimony correctly, there are about 1.1 million people who are still receiving subsidized rates, and you estimate that about $1.5 billion annually is necessary to get to actuarially-sustainable rate. Am I right? Am I reading your testimony correctly? 

So if I do a little math in my head, it is about, on average, those 

1.1 million people would have to pay an additional, on average, 

$1,000—just shy of $1,400 a year. It is a pretty big number. 

What do we know about the ability to pay? Does FEMA have any 

mechanism for getting at the income or the assets of those 1.1 million people? Do you have a sense of the average income and assets 

for the persons in that population? 

Mr. FUGATE. No, sir. And that is one of the goals of an affordability study, was to determine that. As you point out, that is the 

average. 

The average, though, means that if I am a little bit above the 

base elevation, that goes down. If I am below that, it increases significantly. 

And so that affordability piece was—again, my—and looking at 

this, as I have gone, we need to do something to make sure that 

we are actuarially sound, but also means-tested and affordability 

at a point which—and this may sound awkward, but here is how 

I look at it: We need to make sure we are not subsidizing risk 

below which is for the benefit and the interest of the U.S. taxpayer. 

And I think that is the question on which I really need to come 

back to Congress. How do you determine what is affordable, at 

what income, at what level? 

That is not something FEMA does. That is why we support the 

affordability study to bring in subject matter experts who talk 

about that, and ask, ‘‘At what point is affordability, and how much 

of that risk should be shared with the taxpayer, is in the common 

good of the public?’’ 

Mr. HIMES. I completely agree. I don’t think anybody up here disagrees, that over time we want to move to an actuarially-sound 

system. 

Granted, we haven’t done the affordability study. But again, just 

to help us think about the magnitude of the problem, I would assume that when somebody applies for flood insurance, a Social Security number is involved. So I would assume it wouldn’t be that 

hard for you to generate a profile for us of who is in this 1.1 million. 

Mr. FUGATE. It would be a bit different, because currently, the 

majority of our insurance policies are actually serviced by insurance agents. And, so we would again have to look at a system 

30 

where we would now collect data from the Write-Your-Owns to get 

financial information. 

So again, that is why this is a very complex process, and that I 

don’t sell you the policy directly, in most cases. I sell that—there 

is another company that is selling it to you, and they are collecting 

information. 

For me to get financials, and then determine eligibility, would be 

something that we would have to build in. That is why we are saying not only do you have to do the study, you are also going to have 

to look at how do you implement that. 

Mr. HIMES. Okay, thank you. I yield back, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. And now, the 

gentleman from New York, Mr. Grimm, is recognized for 5 minutes. 

Mr. GRIMM. Thank you very much, Mr. Chairman, for allowing 

me to sit in today and to ask some questions. I would also like to 

thank our witness, Administrator Fugate, for your service, first of 

all, and on a personal note, for all the work you and your team has 

done for Sandy. It did not go unnoticed, and it is appreciated. 

I completely understand the need for actuarially-sound programs. 

But I think where we are missing it is the balance between actuarially sound and functionally and practically sound. Would it be 

a true statement to say that if premiums are too high, and people 

can’t afford them, then it jeopardizes the whole program? 

Mr. FUGATE. What it would do is jeopardize rebuilding those 

homes, or building in those areas. I think of the program as a 

whole, the amount of cases that are like that would not affect the 

overall program. In fact, what you tend to see is, those are actually 

the policies that have the greatest risk to the overall program. 

I think a different concern would be if you cannot afford to rebuild, what impacts does that have on communities, because the insurance is not affordable. Which again, depending upon which side 

of the debate you are on, there are going to be people behind me, 

telling you the moral hazard of subsidizing risk is we are going to 

rebuild right where we were, just the way it was, and we are going 

to get wiped out by the next hurricane. 

Mr. GRIMM. Reclaiming my time. I agree with you that after a 

hurricane, to rebuild just the way it was doesn’t make sense. But 

I don’t think that is actually what is happening here. 

I have homeowners who in 2012, their policy was $971. They just 

got their new premium, $38,000 and change. So less than $1,000, 

and now it is almost $39,000. 

Now, would you agree with the statement, ‘‘You can’t get blood 

from a stone?’’ 

Mr. FUGATE. Yes. 

Mr. GRIMM. Okay. On a home that cost what this home cost, you 

wouldn’t spend $48,000 a year. So they will walk away from their 

property, and no one else will buy it. 

And I think that does jeopardize the overall program, because 

your opening statements in your first few questions, you mentioned 

how the program is $24 billion in debt, and the projections, based 

on the new premiums you are expecting, are supposedly going to 

get us out of that debt. 

31 

But I would pause it, that is absolutely not true at all, because 

you are never getting these premiums. That is pie in the sky. This 

person is not paying $38,000. 

So your computer, and those working on this can say, ‘‘Hey, we 

are expecting $38,000,’’ but they are never actually going to receive 

it. So that is why I do say it does jeopardize the program. 

Mr. FUGATE. If the game plan was to charge rates to pay back 

the previous debt, you are absolutely right. That is not what the 

actuarial tables are designed to do. They are designed to deal with 

the future risk. So, they are calculated about what your future risk 

is. And, again, on coastal areas, where you are below that base 

flood elevation, we are seeing those numbers. And that is why, 

again, I am very supportive of an affordability study to look at how 

we take existing infrastructure, means-test it, and deal with that 

issue you raised. But it is not about paying off the previous debt, 

it is about facing the future, and ensuring that premiums coming 

in are covering the exposed risk, not merely just paying off the previous debt. 

Mr. GRIMM. And to expand on that, would you agree—we talk 

about the common good for the taxpayer, and I agree with you— 

we do have to balance the common good. But the profound impact 

on the overall economy for a certain community—when you start 

seeing foreclosures and abandoned homes, that could be more expensive than the Flood Insurance Program. Is that not a possibility? 

Mr. FUGATE. That is, again, a point that we raised in the Sandy 

Recovery Task Force, that without affordable insurance, we are 

going to lose the ability for people to stay in their communities. 

And I have also been supportive of this, of looking at how we make 

a means-tested—again, I think it should be based upon the individual, not just broad blanket community-wide. 

Mr. GRIMM. Right. 

Mr. FUGATE. But it should be means-tested to affordability so 

that we don’t face those situations for existing built infrastructure, 

but not be applied to new growth. 

Mr. GRIMM. One last question in the last few seconds here. 

You mentioned before that the premiums wouldn’t go up until 

after the maps were adopted. But in New York, we haven’t adopted 

the maps yet, but premiums have been raised 40 times. 

Mr. FUGATE. Again, we are—I will have staff give you—if you are 

getting a new policy or you had a lapse in policy, those changes. 

So, I would be very interested in seeing that, because under the existing rules, we have not implemented the increases for permanent 

homeowners. 

Mr. GRIMM. I will give you a heads-up—it is happening. 

Mr. FUGATE. Are these homes that are not primary residences? 

Because that did go into effect. So, if it is a non-primary residence, 

then yes, that has happened. 

Mr. GRIMM. Thank you. I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. And now, another gentleman from New York, Mr. Meeks, is recognized for 5 

minutes. 

Mr. MEEKS. Thank you, Mr. Chairman. 

32 

I was going to just bring up what Mr. Grimm did, because it is 

happening. First, I want to thank you, also. 

The damaged community I represent in the Rockaways was devastated by Superstorm Sandy. But we are, as Mr. Grimm has indicated, that some of the flood maps have not been finalized. And 

people’s rates are going up. And one of the questions that I was 

going to ask was about that. Because folks—these astronomical 

rates that they are getting, where they say that they can’t afford 

their insurance. Yet, they don’t know what to do. Some are going 

to rebuild their homes. 

But because the mapping is not done, what level should they— 

or how high do they have to raise their foundations? What should 

they be doing inside? They have no clue, so, they could try to mitigate the increasing cost of insurance. But they have no idea until 

the mapping is done, and thereby wanting to have the affordability 

study done so that they—because when a person that the home— 

the average middle-class homeowner—the greatest investment that 

they will make in their lifetime is this home. And now, the likelihood of them maybe being able to afford it has substantially 

changed. And that is even before we have completed this affordability study and looked at what is done. 

So, where the mapping is not finished, folks don’t know where 

to elevate their homes. The dollars that are available through the 

insurance company, even to raise is questionable at times. What is 

a homeowner supposed to do? 

That is the reason why we wanted this bill, to delay the implementation until we can have all the mapping done, as well as the 

affordability study, so that we can move in a direction that will 

keep individuals in their homes, and/or make a more intelligent decision on how we proceed thereafter, because we want to—but so 

what do you tell a homeowner, where the mapping is not done? 

What should they do in that scenario? And yet, they are in danger 

of their rates going astronomically high, and can’t afford it. And 

they are willing to raise their home, do what is necessary. 

Mr. FUGATE. I agree that fundamentally, one of the risk factors 

we need to look at, and affordability factors, is homeownership. I 

think it is a very important part of calculating, should we look at 

subsidized rates? Now, let’s be clear—we would be looking at subsidized rates, but I do think homeownership is a key part of that 

affordability that is means-tested. We need to look at that. 

As far as the others, I will repeat what I said in the Senate. The 

way that we have been trying to implement this, we are not finding 

that leeway. And if that is what Congress wants to do, I am going 

to need your help to get there. 

And, again, we are working with and are willing to provide technical assistance. But if that is where Congress wants to go, then 

I don’t have the authority to do that without more direction. I cannot delay parts of this program. 

I think it needs to be balanced against what the overall exposure 

is. But I do agree, homeownership is a factor we need to look at 

very closely. This is something we have identified in the Sandy Rebuilding Task Force that we recommended to the President—that 

affordability of insurance was a key to successful recoveries. And 

not withstanding all the other factors that we are dealing with, as 

33 

we are implementing this, I think we need to keep in mind that 

we have a balance between future risk and our built infrastructure. 

Mr. MEEKS. Even talking about that, because is there coordination, for example, with FEMA and, say, the Army Corps of Engineers? Because when you talk about mitigation—I know when you 

are talking about the Rockaways, certain areas did not have dunes 

or jetties or other things that will reduce the damage or mitigate 

against floods. And that will then—should have a direct effect on 

how much insurance would cost. 

And so, I know that there has been a study around the 

Rockaways, for example. That study is now being done by the 

Army Corps of Engineers—they are going to put in some dunes, 

some jetties, and sea wall. You have some private communities 

that are looking to do certain things themselves and financing 

themselves that should have a direct effect on their cost of insurance. But if they move forward with the rates going up now, they 

could never get reimbursed for it. So, that is the reason for the 

need for the delay. 

Mr. FUGATE. It is— 

Mr. MEEKS. And coordination. 

Mr. FUGATE. For those projects where we know we have Federal 

funding, where we have local dollars to mitigate future, we are able 

to use that to build that into the rates now. This was something 

that Representative Waters brought up about what if the local community was putting your money in? That has always been a problem. If it wasn’t Federal dollars, we couldn’t delay the implementation, knowing that it was going to be mitigated. 

This is part of the reason why the President is putting together 

the Sandy Recovery Task Force—we knew that there would be tremendous overlap of all of our Federal programs, and we wanted to 

make sure that we are working together to build back better. But 

where we have programs that our folks can look at that will map 

the update—and we know that funding is there—we are able to 

factor that in now, and not wait till that project is completed. 

Chairman NEUGEBAUER. I thank the gentleman. 

Mr. MEEKS. I should like to ask— 

Chairman NEUGEBAUER. The gentleman— 

Mr. MEEKS. I didn’t get to put in an opening statement, so I ask 

unanimous consent. 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

Mr. MEEKS. Thank you. 

Chairman NEUGEBAUER. Thank you. 

And now, the gentleman from Massachusetts, Mr. Lynch, is recognized for 5 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman. 

Just a couple of business items here. 

First, I would like to ask for unanimous consent to submit a letter from Otto K. Harling, Ph.D, 212 Otis Street, Hingham, Massachusetts, former engineering professor at MIT. Also, the National 

Association of Home Builders. These letters are all in support of 

the Grimm-Waters legislation. 

Also, the National League of Cities, the National Association of 

REALTORS®, the Independent Community Bankers of America, 

34 

and the Independent Insurance Agents, all in favor of relief from 

the Biggert-Waters legislation, in favor of a delay. 

Chairman NEUGEBAUER. Without objection, except for that one 

from MIT. Is that a credible—yes. 

[laughter] 

Mr. LYNCH. Yes, well—we have to accept that one. He is a voter. 

Chairman NEUGEBAUER. I hear you. Without objection, it is so 

ordered. 

Mr. LYNCH. All right. Thank you. I appreciate that. 

And also from the letter, a pretty smart guy. 

Sir, I just want to make sure we are on the same page here. 

When we included the affordability study in the Biggert-Waters 

legislation, I think it was pretty obvious that we wanted the affordability to be part of the decision in terms of what rates might be. 

It makes no sense. It makes no sense to implement the premium 

increases first—in some cases, a 3,000 percent increase—and then 

do the affordability after you have forced the family from their 

home to figure out whether that was affordable or not. And I think 

that one of the good things that the Grimm-Waters legislation does 

is it makes sure that study is completed. 

And I think you are absolutely right. I think it might take 4 

years before we get the data back and Congress has a chance to 

do a meaningful review. 

When we had our FEMA forum in Scituate, Massachusetts, a 

beautiful coastal community, the folks from FEMA indicated that 

in terms of losses generated year-to-year, they pointed out that 

about 1 percent of the policyholders or the homeowners were responsible for almost a third of the drawdown. So, there were these 

severe repetitive loss locations that were really drawing heavily— 

as I say, up to a third of the funds available. 

Now, if we can get at that—looking at those locations that are 

repeat and severe losses, you would think that would do a lot to 

help the financial viability of the fund, no? 

Mr. FUGATE. And you gave us some powerful tools. 

Previously, many repetitive losses, where we have offered to buy 

or elevate refused, because they had a cost adjustment. They had 

a cost share. You changed the statute so that if they refuse, they 

are going to go to the full rates, which would be an incentive there. 

But, yes, I agree. But the problem is with that 1 percent, it isn’t 

that they have had a previous loss. These are the highest risk. So, 

there is a lot of potential. And, again, when you narrow it down, 

it is these policies that are paying these $30,000, $40,000, $50,000. 

When you do the actuarial rates, there are the smallest number of 

policies, but they have the greatest risk. And they just—they literally put us in the greatest risk to having insolvency in this program, because a few policies—when you are paying out full 

amounts versus a lot of policies that have minimal damages—it is 

hard to offset that, unless you are actually basing it upon that risk. 

That is why it is so high. 

For every foot you are below— 

Mr. LYNCH. Okay, I want to reclaim my time here. You are going 

on a little bit. 

One of the problems that we also have is the high number of appeals on the mapping process. And that much being said, there is 

35 

the fact that when we are doing the appeals on behalf of homeowners—and some towns are now filing appeals for the entire 

town—we are still appealing to the people who made the original 

decision. Is there any thought about—and you know how that is 

going to go. If you are defending your own decision, generally, you 

are going to rule in your own favor. 

And I just think that there is—it may be more accurate to have 

an independent party put in that process to review the decision, or 

the mapping process used by the individual homeowners or town 

versus the one contracted out by FEMA. 

Mr. FUGATE. I agree. And you gave us additional tools. We are 

in the process of—we did the registry notice and we hope to have 

the first meeting in December of the Technical Map Advisory Committee— 

Mr. LYNCH. Okay. 

Mr. FUGATE. Providing that outside advice in that avenue. 

Mr. LYNCH. Okay. And lastly, if I could just say—one of the problems I am having in my district is that the FEMA maps that have 

been put out there do not agree with the historical data. 

In other words, we have had some severe storms. The blizzard 

of 1978, notably, where folks didn’t even get water in their basement during that entire storm—that was a big one. And yet now 

they find out that they are in the middle of a special hazard flood 

zone. So, I am just curious. Generally, the data would agree with 

the historical experience. And in this case, it is not even close. 

Mr. FUGATE. Absolutely not. It doesn’t— 

Chairman NEUGEBAUER. I would like to follow up with a written 

response to that question— 

Mr. FUGATE. Yes. 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

Mr. LYNCH. Okay. I thank the gentleman for his courtesy. 

Mr. FUGATE. Yes. 

Mr. LYNCH. I yield back. 

Chairman NEUGEBAUER. The gentleman from Florida, Mr. Murphy, is recognized for 5 minutes. 

Mr. MURPHY. Thank you, Mr. Chairman. And Mr. Chairman, I 

ask unanimous consent to enter a letter into the record from the 

National Association of Federal Credit Unions. 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

Mr. MURPHY. Thank you. 

And thank you, Mr. Administrator, for being here. Thank you for 

your time and your service. 

You have heard from many of us already about the astronomical 

rate increases for our constituents. Of course, some 4,000 or 5,000 

percent—several people in my district, as will be the case in many 

others, will simply not be able to afford this and will therefore not 

pay it. 

Have you done a study on what that will do to the overall solvency of the program if people simply do not pay? And I think we 

could take a guess. If it is three, four times as much—upwards to 

5,000 times as much—people just aren’t going to pay. 

What would that do to the overall solvency? 

36 

Mr. FUGATE. Probably not what you would expect. I would have 

to go back to the actuaries. But I think if I took my highest risk 

policies out, it would not be as negative of an impact. 

The premiums paid in versus the exposure, unless they were 

paying the full actuary rates, wouldn’t make much difference. The 

continuing-to-get-subsidized rate does make me insolvent. 

Mr. MURPHY. Okay. My next question—I have a letter I am sending to you tomorrow from the Palm Beach County—I represent the 

Palm Beach, Treasure Coast area. 

Mr. FUGATE. I have been there for a lot of hurricanes. 

Mr. MURPHY. In the letter, we ask for a delay on the comment 

period from FEMA. I am wondering what you are doing—reaching 

out to other counties having these same sort of issues to make sure 

that all the comments are taken into consideration, because we all 

have different topographies; we all have different districts with different issues—what you are doing to make sure we get all of these 

concerns on the table so they can be accounted for? 

Mr. FUGATE. What comment period specifically are you referencing? 

Mr. MURPHY. In the Palm Beach area, we sent a letter and we 

got one delay already. We are asking for another delay. And I know 

other counties— 

Mr. FUGATE. This would be in your map-up date? 

Mr. MURPHY. Yes, in the map-up. 

Mr. FUGATE. Okay— 

Mr. MURPHY. Topographies. 

Mr. FUGATE. Okay, we work with the communities. Again, this 

isn’t about delay—it is about getting the best information. And 

mapping is not just FEMA; it is the local community working together, because they ultimately have to adopt their maps as their 

ordinance. 

So, they can continue to work with that. We have numerous processes to get to that map process, so we will continue to work with 

Palm Beach County as they go through their map updates through 

that process. 

Mr. MURPHY. Last week, we had a big roundtable in my district 

and had the administrators and REALTORS® and bankers, et 

cetera. One of the things that came up was that in many communities—many of the new developments that have been built—there 

are new codes, and they are building on higher elevations, with different building codes, different permitting, et cetera. 

They were concerned that is not being taken into consideration 

by FEMA. And I can just imagine that this is happening across the 

country, and how much work that would be for you. 

Are these being taken into consideration—all these new building 

codes and— 

Mr. FUGATE. Absolutely. In fact, if you have done those steps, 

you are not going to see dramatic increases in flood insurance. It 

would be if we changed maps. And since Palm Beach County, as 

we are going through this map revision, my experience in Broward, 

Miami-Dade, and others—we have people who go into the higher 

risk. We have people who come out. 

37 

So, until we see the maps, we don’t know what that is. But by 

building to higher elevations, it is the whole goal here. It reduces 

that risk and it allows the affordable premiums. 

I think the challenge in Palm Beach County is going to be how 

much has been built based upon the existing map data and is there 

a change there, and what does that change do? And are there any 

of those areas that they built to one level that now is below that? 

That would be the concern. But until we see the maps, I couldn’t 

really say what that looks like. 

Mr. MURPHY. Okay. And my last question is, you mentioned earlier that you are completely supportive of the affordability study 

and means testing, et cetera. 

What exactly do you need from the Congress—do you need from 

us? What do you need us to do to make sure we get this done as 

quickly as possible? 

Mr. FUGATE. Again, we have been providing technical drafting 

assistance on some of this. Based upon our work with the National 

Academy of Sciences, we would need additional funds and time for 

them to complete a study, and then we would need time to implement that, based upon those findings. 

Mr. MURPHY. Regarding the funds, in the original bill—it is my 

understanding that there was $11 million for the affordability 

study. 

Mr. FUGATE. No, sir. 

Mr. MURPHY. In the new bill. 

Mr. FUGATE. The new bill was— 

Mr. MURPHY. There is $11 million. 

Mr. FUGATE. The previous bill was—it was far less than that. 

And— 

Mr. MURPHY. And in your testimony to the Senate, what did you 

say would be required? 

Mr. FUGATE. Again, it would depend upon the scope of the study. 

Initially, some discussions with the National Academy of Sciences 

indicated that it would be $1.5 million to $2 million. But really, we 

have to define what that would be, and that would just be one part 

of it. 

You still have the implementation timeframe. So, not precluding 

any additional language, that was based upon the previous legislation. So, I don’t know what would change. 

We would have to go back to the National Academy of Sciences 

and look at what future costs would be based upon the new requirements. 

Mr. MURPHY. Okay. I think the bottom line for all of us is that 

we get this done right. And if there is X amount of money needed 

for you to get it done as quickly as possible, that we know that as 

soon as possible, so we can get it done and move on and get this 

right for our constituents. So, thank you. 

I yield back. 

Chairman NEUGEBAUER. I thank the gentleman, and I believe 

that is all of the questions for this witness. 

Mr. Fugate, thank you very much. Your testimony has been very 

informative and we certainly appreciate the relationship that we, 

the committee, has had with you and your staff. 

38 

I think you have shined some light on some issues and we look 

forward to working with you and appreciate what you are doing. 

And with that, you are dismissed. 

And we will call up the next panel. 

Mr. FUGATE. Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I would ask everyone to either take a 

seat or take conversations out in the hall so we can hear from 

these panelists. 

I want to thank the panel for being here. Thank you for your patience, and as you know, each one of you will be recognized for 5 

minutes to give a brief summary of your written testimony, and 

without objection, your written testimony will be made a part of 

the permanent record. 

Our second panel consists of: Josh Saks is the legislative director 

at the National Wildlife Federation; Michael Hecht is the president 

and chief executive officer of Greater New Orleans, Inc.; Maurice 

‘‘Moe’’Veissi is the immediate past president of the National Association of REALTORS®; Barry Rutenberg is the immediate past 

chairman of the board of the National Association of Home Builders; Chad Berginnis is the executive director of the Association of 

State Floodplain Managers; and Douglas Holtz-Eakin is the president of the American Action Forum. 

I note that the two people on the panel who have the biggest 

smiles on their faces are Mr. Veissi and Mr. Rutenberg, as both of 

them are past president and past chairman. We welcome the panel 

today. 

Mr. Saks, you are recognized for 5 minutes. 

STATEMENT OF JOSHUA SAKS, LEGISLATIVE DIRECTOR, THE 

NATIONAL WILDLIFE FEDERATION (NWF) 

Mr. SAKS. Thank you, Mr. Chairman, Ranking Member Capuano, 

and members of the subcommittee. 

I serve, as you said, as legislative director of the National Wildlife Federation, the Nation’s largest member-based conservation advocacy organization with more than 4 million members and supporters, and I appreciate the opportunity to speak with you today 

about the NFIP and Biggert-Waters. 

First and foremost, NWF has been and continues to be a strong 

supporter of Biggert-Waters. It helps to reduce the habitat loss that 

accompanies unwise, federally-subsidized development in coastal 

and riverine areas and it helps protect people and communities 

from floods and storms. 

NWF has worked for decades to protect and restore the Nation’s 

coasts, wetlands, and floodplains, areas that provide some of the 

most vital wildlife habitat for a wide range of species while helping 

to protect and buffer people and communities from floods and 

storms. 

Key reforms in Biggert-Waters took steps to address the shortcomings of the NFIP—reforms that will help lessen its environmental impacts and protect ecosystems. Specifically, these reforms 

are a move towards risk-based rates, increased science guiding 

mapping, and improved mitigation. 

We continue to support these reforms and we believe they should 

be implemented on schedule. However, we recognize there could be 

39 

some people—owners of primary residences—who now find themselves facing higher flood threats as a result of policies pursued by 

Federal and State Governments and could potentially face 

unaffordable rate increases. 

Among those facing these threats are communities in coastal 

Louisiana where NWF has worked to restore coastal wetlands for 

over a decade. And we are concerned that the real progress being 

made in Louisiana and elsewhere to integrate flood risk management with large scale ecosystem restoration could be undermined 

by reactions to the rate increases. 

To address these concerns while ensuring continued and timely 

implementation, we believe that Congress should consider targeted 

fixes to help those most at risk without rolling back rate reforms. 

Four principles underlie these policy proposals: one, delay of rate 

reforms is not a solution; two, the flood risk to homeowners is real 

and it is increasing and the NFIP should reflect that; three, maps 

must be accurate and rates must send a meaningful market signal 

that is fair to both policyholder and taxpayer; and four, policyholders deserve certainty. 

Specifically, we suggest several steps to provide relief in certain 

cases. First, we believe in the power of pre-disaster mitigation. 

Unfortunately, Federal funding to mitigate flooding and disaster 

risk has fallen far short of demand. Congress must significantly increase the investment in these programs, and ensure that a percentage of funds allocated through these programs are directed towards areas being hardest hit by rate increases. 

We also encourage Congress and FEMA to allocate funds from 

the NFIP reserve fund, created by Biggert-Waters, to provide needed mitigation dollars. Hopefully, with careful mitigation, we can reduce NFIP premiums for those who are hardest hit by rate increases. 

While mitigation is ultimately the key to both risk reduction and 

cost containment for NFIP policies, we recognize that other remedies may be needed to limit the shocks associated with these rate 

increases. We recommend that Congress lengthen the phase-in period for rate increases to grandfathered properties facing updated 

rate maps. 

Biggert-Waters provided this class of property holders with the 

shortest of all phase-in periods in the bill. Congress should extend 

the phase-in period to limit the financial impact of rate increases, 

and to give people and communities ample time to take mitigation 

actions so they will hopefully never see a rate that they cannot afford. 

In addition, Congress should consider limits on premium rates 

imposed on primary residences, to ensure that the final premium 

cost does not exceed what is affordable to homeowners. NWF also 

endorses means-tested subsidies to offset the cost of a risk-based 

rate for primary residences, and homeowners who cannot afford the 

cost of the policy. 

The Congress should immediately establish that fund and make 

sure they do it outside of the rate structure of the program, and 

that it is based on need. We also urge Congress to address regional 

concerns that are impacting rates in some areas of the country 

which are heavily dependent on levee systems for flood control. 

40 

Particularly in parts of Southern Louisiana, some property owners are likely to experience dramatic rate increases, because updated flood maps are not crediting the flood protection provided by 

non-Federal or nonaccredited levees. Congress should immediately 

remedy this by ensuring that appropriate credit is given to those 

levees. 

In closing, the National Wildlife Federation is committed to 

working with members of this committee and our partners across 

the country to ensure that Biggert-Waters reforms are fully implemented, while limiting financial hardship as much as possible. We 

must move forward with implementation of this historic flood reform, while rapidly addressing some of the unintended consequences of Biggert-Waters in a targeted and responsible way. 

In an era of increasingly frequent and severe storms and flooding 

events, enacting reforms to the Flood Insurance Program in a responsible and fair manner is now more urgent than ever. Thank 

you. 

[The prepared statement of Mr. Saks can be found on page 164 

of the appendix.] 

Chairman NEUGEBAUER. Thank you. Mr. Hecht, you are now recognized for 5 minutes. 

STATEMENT OF MICHAEL HECHT, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, GREATER NEW ORLEANS, INC. 

Mr. HECHT. Good afternoon, Chairman Neugebauer, Ranking 

Member Capuano, and members of the subcommittee. It is an 

honor to speak with you here today on the effects of rising flood 

insurance costs across the country. 

My name is Michael Hecht. I am the president and CEO of 

Greater New Orleans, Inc. (GNO, Inc.), the 10-parish or county economic development organization for Southeast Louisiana. 

Since May 2013, GNO, Inc., has been leading the Coalition for 

Sustainable Flood Insurance, a national alliance that is formed to 

ensure that flood insurance will be both affordable and financially 

sustainable. 

The Coalition for Sustainable Flood Insurance now represents 

nearly 200 businesses, trade organizations, and local governments 

in 27 States across America, from the Carolinas to Oregon, from 

North Dakota down to Florida. 

We understand and appreciate the tremendous efforts of the subcommittee, and the full Financial Services Committee that you 

have put into the long-overdue reauthorization of the National 

Flood Insurance Program. We know it was a well-intentioned balancing of the interest of various regions of the country, and the 

budgetary constraints that our government faces in revising this 

essential program. 

Our testimony today, therefore, is not to criticize, but actually to 

highlight some inequities that even the co-author of the Act, Ranking Member Waters, has acknowledged. And we do deeply appreciate her leadership on the issue, as well as that of others, including Representatives Cassidy, Richmond, Scalise, Grimm, and many 

others on this issue. 

GNO, Inc., and the Coalition for Sustainable Flood Insurance 

support a fiscally-sound, actuarially-responsible NFIP that does 

41 

communicate true risk to our citizens. None of us want to 

incentivize, want to create perverse incentives for building in 

harm’s way, nor do we advocate for the continued subsidization of 

severe repetitive-loss properties. 

However, we have a moral and economic duty to protect property 

owners who have played by the rules, and built exactly where the 

government has told them. These people should not lose their 

homes and their businesses. 

We are dealing with a problem of profound, unintended consequences here. It is a three-way confluence of the Biggert-Waters 

Act, incomplete FEMA maps that artificially inflate risk, and questionable actuarial calculations. 

This is leading to the premium increases that you have heard 

about today of 3,000 percent or more, including massive rate increases for policyholders who, again, have built exactly as FEMA 

has told them, and in many cases, have never flooded. 

These clearly unaffordable premium increases are not limited to 

properties with severe repetitive loss, or beachfront properties. 

They are primary residences of all income levels that have never 

flooded. These are the ones that are being impacted. 

There are several examples in your packet that highlight these 

extreme increases. For example, there is a primary real estate 

transaction that just recently fell through in Southern Louisiana, 

because the flood insurance skyrocketed from just over $1,370 a 

year to $8,340 a year. 

And another example, a sergeant in the U.S. Army, who is stationed at MacDill Air Force Base in Tampa, Florida, purchased a 

home in Oldsmar, Florida, worth $158,000. He was quoted a premium for $4,307. This was a 431 percent increase from what the 

previous owner paid. This house has never flooded. 

NFIP rates suddenly jumping as much as 3,000 percent in the 

middle of the mortgage, when the owner had really no reason to 

anticipate this unaffordable increase when the original contract 

was signed, contradicts typical insurance practice and reasonable 

expectation. And businesses and individuals don’t have a choice. 

We know that about 55 percent of the country lives within 50 

miles of the coast. And oftentimes, its insurance is governmentmandated. 

Furthermore, the flood insurance maps that are being rolled out 

across the country are artificially inflating risk by excluding local 

flood protection features like levees and railroad embankments 

from the maps. Not only does this falsely inflate risk for policyholders who are protected by local levees, but it produces a disincentive for local governments to invest in these structures. 

And I have to be clear, this is not just for the 20 percent who 

are currently subsidized because they were built before 1973. This 

is for the 80 percent who are going to lose their grandfathering. 

And this number is not 1 million. This number could be another 

4.5 million, on top of the 1 million. So it is a much bigger problem 

than just the 20 percent who are going to be losing their subsidized 

rates. 

And finally, the calculations we are seeing don’t really make actuarial sense. For example, a homeowner in St. Petersburg, Florida, is trying to sell her primary home. That home is valued at 

42 

$250,000. But she cannot, because the flood insurance premium is 

going to escalate from $1,074 a year to $10,872 a year. The home 

has never flooded. 

And the question is, if the FEMA-based flood elevation is indexed 

to a 100-year storm, then why is this family being charged a premium that would buy a replacement every 23 years? It just doesn’t 

seem to make actuarial sense. 

Now, the good news is that there is a bipartisan solution that 

has been supported now by over 130 co-authors, emerging in the 

House and Senate, to address these unintended consequences. H.R. 

3370, the Homeowner Flood Insurance Affordability Act of 2014, 

will delay premium increase for 4 years, until FEMA has had the 

opportunity to complete the affordability study mandated by 

Biggert-Waters and Congress, and Congress then has an opportunity to consider the recommendations set forth in the study. 

This is common-sense legislation. We should understand the potential impact of Biggert-Waters before we go and we implement it. 

I urge you to bring this up for consideration as soon as possible. 

I encourage this committee to act immediately to protect the 

American economy, and the investments of taxpaying American 

citizens, by bringing up for consideration H.R. 3370. If we do not, 

the National Flood Insurance Program will grievously harm the 

very Americans that it was designed originally to protect. 

In conclusion, to implement Biggert-Waters as it currently stands 

would be economically unwise, and would be morally unjust. We 

must do better. Thank you so much. 

[The prepared statement of Mr. Hecht can be found on page 88 

of the appendix.] 

Chairman NEUGEBAUER. Thank you. Mr. Veissi, you are recognized for 5 minutes. 

STATEMENT OF MAURICE ‘‘MOE’’ VEISSI, IMMEDIATE PAST 

PRESIDENT, THE NATIONAL ASSOCIATION OF REALTORS® 

(NAR) 

Mr. VEISSI. Chairman Neugebauer, Ranking Member Capuano, 

and members of the subcommittee, thank you for holding this hearing on the implementation of the Biggert-Waters Flood Insurance 

Act. 

My name is Moe Veissi. I am the REALTOR®-owner of Veissi 

and Associates in Miami, Florida, and have been a REALTOR® for 

more than 44 years. As past president of the National Association 

of REALTORS®, I am proud to represent the views of more than 

a million-plus members of our Association. 

I want to begin, first and foremost, by thanking you for authorizing the National Flood Insurance Program under Biggert-Waters. 

It put an end to an uncertainty that was shutting down about 

40,000 home sales per month. 

I would also like to acknowledge Congresswoman Waters for her 

leadership over many years, working to maintain access to affordable insurance through that gridlock. We asked her to carry a 

heavy burden, and she delivered, not just for the Nation’s 75 million homeowners, but for all Americans who aspire to the American 

dream of homeownership. 

43 

There is no doubt that the Biggert-Waters reauthorization 

brought stability to the NFIP. But it was too tall an order for 

FEMA to implement in such a short amount of time. And there 

have been unintended circumstances as a result. 

Perhaps the best way to understand the issue is to hear stories 

of those who have been impacted. First-time homebuyers, Tim and 

Catherine Clearwater, from a small town in Hawaii, spent 2 years 

searching for their home, for that entire time, and finally, identified one of just under 900 square feet, a modest home in a small 

town close to where he worked as a Merchant Marine. 

Like many other families across the country, the Clearwaters 

went ahead and bought before they could be warned about the insurance situation. When they bought, they were paying just $2,700 

a year. They are facing a nearly 1,000 percent increase to about 

$28,000, unless Congress acts now. 

If unable to get a loan to further elevate the property, they are 

facing certain foreclosure. While rate shock is one of the worst 

problems consumers are facing, there is widespread insurance confusion. Cost is not the only issue. Establishing a baseline is. 

In one case, a buyer received 6 different quotes ranging from $10,000 to $30,000 per year. Three of the quotes came from three 

different agents out of the same company. 

All six agents provided inaccurate information about the property, and the mistakes that they made were driving the quotes. 

When the correct data was entered into the system, the true rate 

turned out to be just $480 a year, which by the way, we confirmed 

with FEMA. 

Sadly, those unforeseen and unintended circumstances are happening across the country. We also understand this is not a partisan issue. We are confident that both sides will be able to come 

together to sort through the issues and to agree on a longer-term 

fix. 

But before we do, we need Congress to call a time-out and to 

delay further implementation until FEMA can investigate and report back to Congress. We need an affordability baseline before we 

proceed. 

Thankfully, Congressman Grimm and Congresswoman Waters 

and 132 of their colleagues have introduced bipartisan legislation 

to do just that. It is called the Homeowner Flood Insurance Affordability Act. We urge the committee to take up this legislation immediately. I can assure you time is of the essence. 

Rates went up October 1st, and every day you wait, the problem 

only compounds. The economy is still recovering as the housing 

market is today. We need this. The National Association of REALTORS® and our 1 million members stand ready to work with the 

committee and with FEMA to find a way to move forward. 

We owe it to the Americans who know that their hearts are in 

homeownership are still intact and the beacon for homeownership 

and prosperity in the 21st Century lies in that ability to be able 

to buy and sell a home in America. 

Thank you for the opportunity to testify. I am happy to answer 

any of your questions. 

[The prepared statement of Mr. Veissi can be found on page 170 

of the appendix.] 

44 

Chairman NEUGEBAUER. I thank the gentleman. 

Now, Mr. Rutenberg, you are recognized for 5 minutes. 

STATEMENT OF BARRY RUTENBERG, IMMEDIATE PAST 

CHAIRMAN OF THE BOARD, THE NATIONAL ASSOCIATION OF 

HOME BUILDERS (NAHB) 

Mr. RUTENBERG. Thank you, Chairman Neugebauer, Ranking 

Member Capuano, and members of the subcommittee. My name is 

Barry Rutenberg and I am a home builder from Gainesville, Florida, and NAHB’s immediate past chairman. 

NAHB believes in a strong and viable NFIP and supported the 

Biggert-Waters Act. However, we are concerned about dramatic 

flood insurance premium increases and the negative impact these 

increases are having on the construction, remodeling, and sale of 

homes. 

The National Association of Home Builders strongly supports the 

requirement for FEMA to redraw flood maps using scientificallybased data to show the true risk of flooding and a clearer picture 

of where actuarial rates should be set. FEMA has neglected to factor in privately funded flood control structures, resulting in many 

properties being mapped in a higher rate zone, causing homeowners to be forced to purchase unneeded flood insurance or pay 

higher than necessary premiums. 

Other examples of inaccurate mapping have resulted in homes 

unnecessarily being drawn in the flood maps or placed in the higher rate zones for the first time. It typically takes years for those 

mistakes to be fixed, often requiring lengthy and costly appeal 

processes, as well as forcing the payment of escalated premiums 

until the problem is resolved. For some, it may force them from 

their homes, causing property values to drop and neighborhoods to 

decline. 

The Biggert-Waters Act requires the immediate payment of full 

risk rates upon sale or transfer of property. Adding to today’s tight 

credit conditions, this change is already deterring prospective buyers who fear the higher rates will make their mortgages 

unaffordable. Homeowners may also be unable to sell their current 

homes and be prevented from becoming move-up buyers of newly 

constructed homes. In fact, we have heard of many cases where 

pending sales have been canceled at the last minute. 

Of concern to NAHB is the lowering of the substantial improvement cumulative threshold from 50 percent to 30 percent. Any renovation that meets the new lower threshold will trigger a phasein to higher rates and must immediately be brought into compliance with the current requirements such as elevating a building 

above the base flood elevation. 

We estimate that the new substantial improvement threshold 

will place up to $8.5 billion in annual remodeling economic activity 

at risk. We believe this will adversely impact homeowners by forcing them to either forego even the simplest of remodeling jobs or 

face extensive and expensive renovations which sharply increase 

flood insurance rates. 

NAHB appreciates that many in Congress share our concerns 

and have introduced a wide range of legislative proposals. NAHB 

recognizes that they are not the only possible solutions. However, 

45 

they largely represent steps that balance affordability or the viability of the program. We recommend that Congress delay all rate increases until the affordability study is complete. NAHB recommends that Congress provide FEMA with the necessary funds to 

complete the study as quickly as possible. 

Only then will FEMA and Congress have a true understanding 

of the economic impact the higher rates will have on homeowners. 

While delay might not be the most ideal solution for the long-term 

fiscal stability of the NFIP, the current situation is undercutting 

the effectiveness of the program and causing unnecessary economic 

distress. 

Further, NAHB recommends that Congress require that FEMA 

take into account all flood control structures when mapping, allow 

for sufficient time for public review, and independent vetting of the 

new maps, and prohibit rate increases based on incomplete or inaccurate maps. 

We would also recommend that Congress reinstate the higher 

substantial improvement threshold, allow FEMA to continue flexibility for the basement exception, and regional issues, and urge 

FEMA to match its definition of primary residence to that of other 

Federal tax regulations. 

NAHB is committed to working with this subcommittee and with 

Congress to find pragmatic solutions that will prevent undue hardship in the recovering housing market, prevent home values from 

decreasing, and make the NFIP stronger and more effective for 

years to come. 

We appreciate your leadership and thank you for your time today 

and for the opportunity to testify before you. 

[The prepared statement of Mr. Rutenberg can be found on page 

104 of the appendix.] 

Chairman NEUGEBAUER. I thank the gentleman. 

Mr. Berginnis, you are recognized now for 5 minutes. 

STATEMENT OF CHAD BERGINNIS, EXECUTIVE DIRECTOR, 

THE ASSOCIATION OF STATE FLOODPLAIN MANAGERS 

(ASFPM) 

Mr. BERGINNIS. Thank you, Chairman Neugebauer, Ranking 

Member Capuano, and members of the subcommittee for lasting 

this long. I am Chad Berginnis, executive director of the Association of State Floodplain Managers. Our 15,000 members and our 35 

chapters are on the frontlines trying to implement Biggert-Waters 

as we help educate homeowners as well as those affected on how 

to deal with these rate increases. 

I want to start by talking about some successes about BiggertWaters because I think these are important to also talk about. 

Superstorm Sandy has shown that the basic principles of BiggertWaters reforms work; that once people are aware of and accurately 

price risk, they will take mitigation actions such as elevating, floodproofing, or relocating out of harm’s way. 

There is more interest in mitigation activities up and down the 

affected areas, and when talking to long-time floodplain managers, 

they have said that we have seen more mitigation activities actually occurring after this large event than we have in previous 

events in modern history. 

46 

Communities are considering higher building standards such as 

enhanced free-board factors—some communities requiring up to 3 

feet above flood elevation. And that results in lower flood insurance 

rates and better resiliency. 

Elsewhere in the country, property owners are seeking mitigation options to deal with increased rates. There is more interest in 

the community rating system. And the scientific resolution panel to 

solve difficult mapping problems has successfully remedied such 

issues. Lenders are being more careful to review their portfolios to 

ensure those who are required to have flood insurance do indeed 

have it. 

Ultimately, though, the cumulative impact of the reforms was too 

much and too fast for many property owners of at-risk, pre-flood insurance rate map (pre-FIRM) buildings. The Nation has operated 

under a program that for 45 years worked under the following 

premise: policy discounts for older, at-risk structures, and for those 

whose flood risk has gotten worse. 

ASFPM supports many of the reform principles in BiggertWaters, but we do want to highlight some of the most impactful 

suggestions among our 20 specific recommendations found in our 

written testimony. 

The first suggestion is to extend the phase-in of full-risk rates for 

pre-FIRM structures, reducing the per-year increase to a range of 

5 to 10 percent annually, and eliminate the current structure 

which phases in these rates either over 20 percent, 25 percent, or 

immediately. What we have been finding is the most onerous triggers are the immediate triggers to full-risk rates, and those are affecting primary households, the very group that Congress was 

seeking to protect under the Biggert-Waters reforms. 

The longer phase-in period allows progress to be made on the 

NFIP affordability study, as well as giving time for property owners to seek mitigation options and assistance to reduce their flood 

risk. It also provides certainty. 

But we can’t forget that regardless of how we deal with that 

issue, there is a broader affordability problem brewing. The average flood insurance rate for A zones and B zones, those that are 

required to get flood insurance, increased by 17 percent this year. 

The committee should take immediate action on new and innovative affordability concepts versus waiting for the completion of the 

affordability study. Pilots could include group- or community-based 

flood insurance, means-tested vouchers, and those vouchers linked 

to low-interest loans, and just stand-alone low-interest loan programs to mitigate those homes. 

Third, existing mitigation programs need to be enhanced and 

need to be made more efficient to help with the affordability issues. 

Within a flood insurance policy, there is a provision called ‘‘increased cost of compliance (ICC).’’ The 2004 reform of the NFIP 

broadened that to require the triggering of ICC whenever a FEMA 

offer of mitigation was made. That has not been fully implemented, 

and that provision could be more accommodating and flexible. 

The flood mitigation assistance grant program had $300 million 

in applications this fall alone, but the authorization is only $90 

million. The pre-disaster mitigation program is one that FEMA has 

47 

proposed to eliminate twice in the past 2 years and that could provide direct mitigation assistance to affected homeowners. 

Fourth, flood mapping in the Nation must be completed and it 

must be maintained. ASFPM fully supported the creation of the national flood mapping program, but we have been sorely disappointed to see the Administration’s budget request of less than 

one-quarter of the authorized funding in 2014. As was said many 

times earlier, mapping is a fundamental part of the actuarial 

soundness of the program. And to not complete the mapping further threatens the long-term program fiscal solvency. 

We must also do something about the program’s debt. Congress 

has reacted quickly by increasing the borrowing authority of the 

NFIP after Hurricanes Katrina and Sandy, but is slow to recognize 

that catastrophic losses cannot be repaid by reliance on the insurance mechanism alone, especially prior to Biggert-Waters. 

Given the very high risks associated with flooding and the high 

occupancy of flood areas, and the multiple purposes of the NFIP, 

as there are very valid public benefits of having the program, 

ASFPM desires to ensure that the program is on solid financial 

footing, reduces flood losses, and protects the natural functions of 

floodplains well into the future. 

Thank you. 

[The prepared statement of Mr. Berginnis can be found on page 

62 of the appendix.] 

Chairman NEUGEBAUER. I thank the gentleman. 

And finally, Dr. Holtz-Eakin is recognized for 5 minutes. 

STATEMENT OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, THE 

AMERICAN ACTION FORUM 

Mr. HOLTZ-EAKIN. Thank you, Chairman Neugebauer, Ranking 

Member Capuano, and members of the subcommittee for the 

chance to be here today. It is late. I will be brief. 

The history of the NFIP is a history of underpriced premiums, 

program financial shortfalls, and poor incentives. And this is a 

story that is quite familiar from other Federal attempts to manage 

risk, as the chairman mentioned at the outset. 

When I was the Director at CBO, we undertook a systematic 

study of a wide variety of risk management efforts by the Federal 

Government: Federal deposit insurance; the Federal Housing Administration; Fannie Mae, Freddie Mac and the GSEs; Federal student loans; Federal health programs. And those studies revealed 

the tale exactly as we have seen it in the NFIP: underpriced premiums, and the taxpayer left holding the financial shortfalls that 

those programs have produced. 

From that perspective, the reforms in Biggert-Waters, which involve fundamentally better measuring the risks that are presented 

and then more accurately pricing those risks are entirely desirable 

and should be embraced by the committee and indeed by the Congress as a whole. 

What we have seen, I think, is instead a fear that the transition 

costs for a small number of affected policies might drive policy instead of the entirely desirable reforms for the program as a whole. 

And I would urge the committee and the Congress to look at targeted transition relief for those who merit it on the grounds of inVerDate Nov 24 2008 18:11 Jul 18, 2014 Jkt 086687 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 K:\DOCS\86687.TXT TERRI
48 

come or special circumstances and not to put off the reforms the 

program needs or otherwise undercut a desirable move toward accurately measuring risk, pricing that risk, and providing the incentives to avoid putting value at risk going forward. 

I thank you for the chance to be here today, and look forward to 

answering your questions. 

[The prepared statement of Dr. Holtz-Eakin can be found on 

page 94 of the appendix.] 

Chairman NEUGEBAUER. Thank you. 

I now recognize myself for 5 minutes to ask questions. 

One of the things that we have heard a number of people talk 

about today—they used the word ‘‘affordability,’’ and they referred 

to the affordability study. So when we talk about affordability, that 

means that there may be people who—I guess we are assuming— 

can’t afford the premium on the flood insurance on the residence. 

Just for example, if Congress decided to do something about the 

affordability issue for those people and give them a subsidy or a 

voucher or something like that, who is going to pay for that? 

Mr. Saks, if somebody can’t pay their share, then who should 

pay? 

Mr. SAKS. Thank you, Mr. Chairman. 

I think the question here is how much do we want the taxpayer 

to pick up that subsidy? And, certainly, there is a role for the taxpayer, but the Congress has to decide what a comfortable place is. 

I think what we would like to see is communities, individuals 

taking as much mitigation responsibility as they can ahead of time 

so we don’t have to get to those rates, and so ultimately nobody has 

to pay that higher cost. 

Chairman NEUGEBAUER. So you would have the taxpayer pay for 

it? 

Mr. SAKS. Frankly, as a conservation group, sir, it is not really 

our place to say who should pay for it, but— 

Chairman NEUGEBAUER. But your answer was the taxpayer. 

So Mr. Hecht, who should pay? 

Mr. HECHT. Thank you, Mr. Chairman. 

Yes, I think that I would agree that to some significant degree, 

living and working near the coast is a bit of a public good. We get 

our oil and gas; our seafood, our ports are there. And so there has 

to be, I think, a responsible look at to what degree that would be 

paid for as a public good. But, again, I am an economic developer, 

so I am considering it from that perspective. 

Chairman NEUGEBAUER. So if it is the taxpayers, is it the taxpayers all across the country or is it the taxpayers in Louisiana for 

Louisiana residents? 

Mr. HECHT. Thank you. 

I think, given that the National Flood Insurance Program is held 

in all 50 States, and the issue spans the whole country and the entire country benefits from things like our port activity, that is a 

general issue for the country. 

Chairman NEUGEBAUER. Thank you. 

Mr. Veissi, who should pay? 

Mr. VEISSI. I think one of the reasons we are here is to anticipate 

the opportunity to be able to extend this out for a 4-year period so 

we can figure out who pays, how they pay, and what distribution 

49 

works across-the-board. This isn’t a taxpayer issue; it hasn’t been 

initially, anyway. It has been an issue that was a loan from the 

Treasury. It is going to be paid back. We don’t know exactly how 

long it will take to get paid back, but we know it is a loan that 

has to be paid back to the Treasury. 

So our position, quite frankly is that better minds together over 

the next few years can best figure out exactly how this is distributed accurately and fairly across-the-board. That is why we are 

asking for a timeout and to have a baseline. 

Chairman NEUGEBAUER. Well, there are only two groups of people who can pay for it: the other policyholders—so you would 

spread the love over other policyholders; or the taxpayers. So which 

one do you choose, the policyholders or the taxpayers? 

Mr. VEISSI. Congress has already chosen that for me. They have 

said the Treasury is responsible. We have borrowed that money 

from the Treasury. 

Chairman NEUGEBAUER. Yes, but the Treasury— 

Mr. VEISSI. I’m sorry? 

Chairman NEUGEBAUER. —is the taxpayers. We use that word 

like it is a magic word. Where does ‘‘the Treasury’’ get their 

money? They get it from me and you. 

Mr. VEISSI. There is— 

Chairman NEUGEBAUER. Mr. Rutenberg, do we get it from the 

taxpayers or from the policyholders? 

Mr. VEISSI. We will ultimately, hopefully, answer that question 

by having that timeout to be able to take a hard look at where that 

happens. We know it is a loan; we know it has to be paid back. 

We are not sure whether it is going to be paid back in 5 years. We 

are not sure it is going to be paid back in a longer period of time. 

Chairman NEUGEBAUER. Okay, Mr. Rutenberg? 

Mr. RUTENBERG. Mr. Chairman, I think there are more than two 

choices, not to be disrespectful. But I know that in the developments that I have done, we have spent lots and lots of money to 

mitigate stormwater. And currently, those are not being addressed 

in the calculations. 

So my question is, I am looking forward to the study and the discussions, because I think, perhaps, we are assuming a certain price 

for the insurance and it may not be the right price. 

Ultimately, it may need to be the taxpayer or the ratepayer. It 

may be the market. And if we have the right data, and we get the 

right prices, then people will start to move around to where it 

makes sense for them. That will go on over time. I think we need 

to have some transition to that. 

And I am speaking personally. I am not speaking for the association policy. As far as I know, we have no policy on the matter. 

Chairman NEUGEBAUER. Mr. Berginnis? 

Mr. BERGINNIS. I also think there are two answers, and it is the 

taxpayer or the taxpayer—and it depends how we want to pay. 

The taxpayer, if we don’t have a targeted-type program like a 

voucher program and folks walk away from their homes or they 

drop their flood insurance and they get disaster assistance, the taxpayer pays. So, isn’t it better to have at least partial payment 

through an insurance mechanism where the insurance fund then 

50 

covers those losses and those individuals do not have to take out 

disaster assistance— 

Chairman NEUGEBAUER. So basically, it is a transfer. And so the 

question is, do you transfer it to other policyholders, other people 

who have flood insurance policies, or do you transfer that risk to 

the taxpayers? That is the question. 

Mr. BERGINNIS. And I do think, with other policyholders, part of 

the problem is—as I mentioned in my testimony—the rates for 

other policyholders are going up. As FEMA implements the reserve 

fund, for example, which is a very good provision of BiggertWaters, but that reserve fund is going to go up 5 percent a year 

for the next several years. And so the average rates, again, for the 

mandatory purchase areas, they increase 17 percent this year. I 

wouldn’t expect that to abate anytime in the next few years. 

And so, I think to also include a subsidy on those policyholders 

creates an affordability issue over there. 

Chairman NEUGEBAUER. Mr. Holtz-Eakin? 

Mr. HOLTZ-EAKIN. Obviously, our first choice is the ratepayers. 

I would point out, as I did in my written testimony, that historically you can make the case that this program has never broken 

even, and it has been running at a real economic loss since its inception. So they have never paid—much less add on a subsidy. It 

would be desirable if they did. 

The second set of taxpayers might be in a local area or a State. 

And as I mentioned in my testimony, you could imagine this type 

of insurance, if it is not fully priced, being offset against other 

kinds of insurance—ex-post disaster rates to States—so that they 

had incentives to go out and do the kind of mitigation that Mr. 

Rutenberg mentioned—and that would lower the insurance and 

provide affordability. 

And the last choice, I would, suggest would be the taxpayers as 

a whole. 

Chairman NEUGEBAUER. I thank the gentleman. 

The gentleman from Massachusetts, Mr. Capuano, is recognized 

for 5 minutes. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

I would just like to point out that generally, as I understand it, 

most ratepayers are also taxpayers, and the same is true of taxpayers are ratepayers, because they pay insurance somewhere. 

I have never had a tornado in my district, but I am sure I have 

covered some people who do. I have never had an earthquake in 

my district, yet I am sure I cover some people who do. That is the 

whole idea here, spreading it out because there are certain national 

interests. This may or may not be one of them. 

But that is not where I wanted to go. Where I wanted to go— 

because I think it is a fair question. And I think, again, I have 

been happy that the entire panel and, to my knowledge, every 

Member on both sides of this aisle have all said the goal is to try 

to get off subsidies. Now, of course, the reality is that we are getting hit in the face with significant increases which none of us expected. 

So now the question is, what do we do? And some of us have 

said, ‘‘Pause, let’s try to figure this out.’’ 

51 

Mr. Berginnis, I saw your 20 points. Some of them I don’t understand. I would love to have that discussion, but I can’t do it in a 

day. It is going to take a little while. And that is the whole idea 

of hitting ‘‘pause.’’ 

And before I ask my question, Mr. Saks, Mr. Holtz-Eakin, are 

you surprised that you are kind of on the same side of the whole 

thing? I am. I just think it is great to have the two of you guys 

on the same side of an issue. It is— 

Mr. SAKS. I am not surprised. I think often good environmental 

policy means reducing harmful subsidies. So, there are many cases 

where conservation is— 

Mr. CAPUANO. We don’t want to talk about corporate subsidies 

just yet. That is a different issue. 

But I do want to talk about one thing. Mr. Berginnis, all of your 

floodplain managers—a lot of them have seen or witnessed, I am 

sure, significant flooding. When flooding occurs, does it only hit primary residences? Does it somehow go around small businesses and 

second homes? 

Mr. BERGINNIS. No, it does not. 

Mr. CAPUANO. It hits everybody? 

Mr. BERGINNIS. Yes. 

Mr. CAPUANO. And when someone owns a small restaurant, 

when they lose that restaurant to a flood, are they any less impacted than somebody else who might lose a home? 

Mr. BERGINNIS. Even some of the FEMA data and the statistics—I heard a public service announcement just the other night 

that up to 40 percent of businesses that experience a major disaster never reopen. So one might argue they have more of an impact. 

Mr. CAPUANO. The reason I ask is because the bill that several 

of you mentioned—I am not a co-sponsor yet, though I agree with 

the bill. And I am not a co-sponsor because it does not include 

small businesses and second homes. 

And, again, I get the feeling that some people think that all second home owners are Bill Gates—and I am sure he has a lovely 

second home, or probably 12 of them. I don’t know and I don’t care. 

But Mr. Veissi, you are the REALTOR®, surely you have a lot of 

members of your REALTORS® who sell second homes, do they 

have the experience that every second home owner is a multi-millionaire who can just throw money away? 

Mr. VEISSI. We recognize that a vast majority of the second home 

owners in this country are not multi-millionaires; they are working 

fellows and gals just like you and me. We know and understand 

that. We want to make sure that they get a fair shake, and that 

is why we are asking for a pause to get a baseline for them so that 

each of us— 

Mr. CAPUANO. So you wouldn’t oppose an amendment to H.R. 

3370 that would include second homes and small businesses? 

Mr. VEISSI. I wouldn’t oppose an opportunity to include all of 

that information after a timeout so that we can at least noodle it 

through and figure out where we are going to go with second 

homes, small businesses, and primary residences. 

We know one thing; we have a fledgling economy just recovering 

in the housing market, one that is enormously important to this 

52 

economy, but more important to the social and cultural fabric of 

this country. 

Mr. CAPUANO. Thank you. 

Mr. Rutenberg, would your association oppose doing—whatever it 

is we do for primary home owners, would you oppose doing the 

same for small businesses and second home owners? 

Mr. VEISSI. We wouldn’t oppose the— 

Mr. CAPUANO. Mr. Rutenberg. 

Mr. VEISSI. Oh, I’m sorry. 

Mr. CAPUANO. You already answered. 

Mr. VEISSI. We have spent a lot of time together. 

Mr. CAPUANO. That’s okay. My wife answers for me all the time. 

Mr. RUTENBERG. We very much are supporting small businesses. 

Most of us are small businesses. And the secondary homes—the 

typical income of someone in a secondary home is $74,000. And it 

is us, and I think that we need to have the study so that we can 

know what we are doing, and we can do this well. 

One of the problems that I was thinking of after my answer is 

that 25 percent to 30 percent of the money that is spent on claims 

goes for 1 percent and repeats. We have a number of different subjects that we have to attack and we very much support small businesses and second homes. 

Mr. CAPUANO. Mr. Berginnis, would your managers oppose— 

whatever it is we do, would you oppose doing something comparable for small business and second homes? 

Mr. BERGINNIS. In fact, in our testimony, and this is why we 

have suggested that you remove all of the triggers, the immediate 

20 percent and 25 percent, and replace it with something like in 

the 5 percent to 10 percent range, that includes all properties primary homes, small businesses, and secondary homes. 

You could differentiate, be on the lower end of the spectrum for 

primary homes recognizing potentially all of the value and impacts 

there and maybe on the higher end of the range. But overall, all 

of them would have that reduced transition. Because it is important to us to at least get on the path to going to actuarial. 

We spent a lot of time in this program with subsidized rates, and 

it is going take us some years to dig out of it. 

Mr. CAPUANO. I agree. 

My time has expired. I appreciate the chairman’s indulgence. 

But again, I just want to repeat, I am glad that we are all kind 

of on the same general chapter, if not the same page; again, no one 

is opposed to getting to actuarially sound rates if at all possible, 

but we all need to do this in a way that doesn’t single out a certain 

number of people unintentionally. 

If we intend to do it, so be it. But I think everybody would agree 

that what has happened, and what is happening now, is an unintended consequence, which is why many of us are trying to hit the 

pause button. 

Thank you, gentlemen, for your indulgence. 

And I thank the chairman. 

Chairman NEUGEBAUER. And now the gentleman from Ohio, Mr. 

Stivers, is recognized for 5 minutes. 

Mr. STIVERS. Thank you, Mr. Chairman. 

53 

I would like to thank the panel for their testimony, and Mr. 

Rutenberg, you just said something a minute ago that really kind 

of hit me about the number of claims that are related to a few 

number of homes that have repeat claims. 

Do you think the system would be better off—I certainly don’t 

think anybody wants to kick anybody out of their homes, but when 

those folks who have repeat claims are either rebuilding or in the 

process of selling their home for FEMA or the Federal Government 

to actually purchase that property and take it back to green space, 

give them the value of that property and then allow them to build 

somewhere that doesn’t have as much risk? 

Mr. RUTENBERG. I think it is—we are dealing with family histories, but I think the options should be examined, and this is 

again personal, not association policy, but I think you should examine it because it could be that both the Flood Insurance Program 

and the families would be better off if we did something innovative. 

And there are certainly—if it was your personal business, and 

you had that kind of lost history you would be looking at what 

would be a smart alternative and would treat the people fairly. 

Mr. STIVERS. And you may or may not have information on this, 

but when home builders build a new home, if it is inside or near 

a floodplain, how often do they sit down with the person who is 

building the home and advise them on mitigation techniques that 

might decrease their risk and therefore decrease their insurance? 

Mr. RUTENBERG. I can answer in my area that every time we 

build in a platted subdivision where we are selling a lot the floodplain information is on the plat, it is part of the discussion, what 

zone they are in, what needs to be done, and it is assumed that 

we automatically take care of it in our construction. It is, I think, 

the difference would be when dealing on someone’s property that 

they have had, then we have to be a little bit more careful and that 

does show upon the surveys. And then you have the re-sales and 

that is another issue that is not part of new construction. 

It also does come to bear on remodels. And when you go for your 

building permit, it becomes an issue there. 

Mr. STIVERS. Sure. 

Mr. Saks, what about people who build in environmentally-sensitive areas and rebuild in environmentally-sensitive areas? 

Shouldn’t there be some way—actuarially sound rates, I think, help 

do this, shouldn’t there be some way to help give them an incentive 

to not re-build in an environmentally-sensitive area? 

Mr. SAKS. I think— 

Mr. STIVERS. And again, nobody wants to kick anybody out of 

their ancestral home, or anything like that, but should the rest of 

the taxpayers in this country subsidize them? 

Mr. SAKS. Of course Congressman, I think there are a couple of 

answers to that, first for new development or re-development, 

Biggert-Waters and the changes associated with it do send a strong 

market signal, and I think that is the name of the game here, to 

use market forces to help impact the decisions we make, and in the 

case of those areas, it does help lessen floodplain development. 

And the corollary is that we have seen over the years, the rates 

associated with NFIP really exacerbate floodplain development. For 

homes that are already there, as you said, it is a very personal deVerDate Nov 24 2008 18:11 Jul 18, 2014 Jkt 086687 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 K:\DOCS\86687.TXT TERRI
54 

cision that hopefully rates help people take mitigation actions and 

when possible when communities and homeowners and everyone 

else can agree when we can provide buy outs for them, that is good 

for communities and for the environment. 

Mr. STIVERS. Thank you very much. 

I think several of you have proposed solutions and ideas about 

how to adjust the program, and certainly all of us as policymakers 

are sensitive to the price shocks that some folks are experiencing, 

and I know a couple of you have suggested just holding off any rate 

increase, and several others have talked about capping rate increases. Can we go down the line and talk one at a time about 

what your preference is, about how policymakers should move forward? 

Obviously, we need to move toward actuarially sound rates over 

time. 

Mr. SAKS. Our preference is some type of cap and a longer phasein period, and the reason for that, Congressman, is we have talked 

a lot about market signals, mitigation— 

Mr. STIVERS. And I only have 20 seconds left, so I really just 

want— 

Mr. SAKS. We want to get those signals. 

Mr. STIVERS. —to get to the bottom line here, yes, thanks. 

Mr. HECHT. Thank you, Congressman. 

Nobody in our constituency is against paying more. We would 

say, first have it means-tested and possibly capped. We have been 

looking at 1 percent of the assessed value of the home. 

Mr. VEISSI. We are looking for the opportunity to have a longterm solution, that long-term solution through the investment of 

time and information over this full period in this brand new piece 

of legislation. 

Mr. RUTENBERG. While we are in this long-term discussion, I 

hope that we are bringing up doing the affordability study, that we 

are looking at the private water management that has been done 

and we are thinking not only about new houses but all of the housing and making it fair. Let’s get the NFIP so it is actuarially sound 

on good data. 

Mr. BERGINNIS. To not delay the rates, but phase them in over 

a longer term. 

Mr. HOLTZ-EAKIN. Keep moving and provide those who are in excess of an income-based cap system. 

Mr. STIVERS. Thank you. I yield back the balance of my time. 

Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

Mrs. Beatty is recognized for 5 minutes. 

Mrs. BEATTY. Thank you, Mr. Chairman. And thank you to all 

of our witnesses who are here today. I think that Congressman 

Stivers has given me a great segue into my comments and questions to you. 

Certainly as someone who got on board with supporting this, and 

I think it was because of the sensitivity of the price shock, what 

I have learned today is that we need to collectively figure out how 

we can work with FEMA, the insurance companies, us as lawmakers and policymakers to find a long-term sustainable solution 

55 

which will restore the solvency to the National Flood Insurance 

Program, and also keep Americans in their homes. 

And certainly, as many of my colleagues have said, I support the 

return to actuarially priced premiums, but I am worried about the 

long-term viability if too many of the policyholders cancel their 

policies. 

But let me shift gears and go to you, Mr. Saks. In your testimony, you expressed concerns about the development of coastal 

areas, marsh and swamp lands and the construction of dams and 

levees around the country. Specifically, you mentioned the impacts 

on the environment and the local wildlife and the communities that 

are in areas that are prone to flood. 

Can you tell me how these concerns are related to the National 

Flood Insurance Program, and why the National Wildlife Federation supported the Biggert-Waters reform? 

Mr. SAKS. Yes. Thank you, Congresswoman. 

It so happens that floodplains—the areas where flood waters 

go—are some of the most important ecological areas we have in the 

country. And they give us a lot of environmental benefits aside 

from wildlife habitat. They are places where groundwater settles, 

they keep pollution from running into our rivers and streams. They 

do a lot of important things. 

And unfortunately, those are also the areas where people like to 

live. And we are not saying that people shouldn’t live there, but 

there should be a fair market signal so that people take into account all of these things when they are going to decide where to 

live. 

Unfortunately, by suppressing rates we have masked that signal, 

and people have developed these areas, and the Biggert-Waters bill 

helped increase rates so hopefully we will see some of these market 

signals lessen the development of those areas and the habitat loss. 

Mrs. BEATTY. Mr. Rutenberg, can you please speak to how, if at 

all, the developers engaged in subdevelopment of new communities 

use flood mapping to determine where to build? 

Mr. RUTENBERG. I can talk about some of them, because it is different in different areas—I am familiar with the Southeast. I am 

not necessarily familiar with the Northwest or other areas. So, in 

my area, what we normally do is, we do an ecological study, and 

we do topographic, and we start with that. And we try and figure 

out where it is that we can build. 

I would also like to mention that I serve on the board of the Conservation Trust for Florida, and I have been an adviser for the 

Florida Defenders of the Environment for some time. And you can 

have development and environmental at the same time. They are 

not mutually exclusive. 

We do look very carefully at where we can be, and we determine 

where we can be. And then, we start working on the layout and 

the lot size, depending what the product is. 

It is interactive. We have water management districts. We have 

environmental departments. And we have all sorts of people with 

whom we are coordinating. It is pretty well gone through by the 

time we get to a development. 

It has changed dramatically in the last 30 years. It is not what 

it used to be. 

56 

Mrs. BEATTY. And lastly, with the expectation that the flood insurance premiums will rise dramatically in the near future, would 

that impact construction? 

Mr. RUTENBERG. We will break it into a couple of categories. One 

is, in new construction in my area, I think our premiums would go 

down because we have done so much private mitigation to it. But 

we are also concerned with the entire housing industry. We are 

concerned with the people who have been in the house for 4 years, 

the people who have to move. Someone who has to go to a nursing 

home and sell their house—it needs to be viable. 

If you are going to buy a new house, you are often moving out 

of an old house and selling it. It is a very interactive change, but 

the actual new homes, I think, on an actuarial basis, will fare very 

well, because their cost to the system should be very low. 

Mrs. BEATTY. Thank you. 

And I yield back. 

Chairman NEUGEBAUER. I thank the gentlewoman. And the gentlewoman from California, the ranking member of the full committee, Ms. Waters, is recognized for 5 minutes. 

Ms. WATERS. Members of the panel, I don’t know if you were 

here in the room when we had the discussion with the head of 

FEMA. And the information that was shared by many of us about 

the complaints that are being received from our constituents, and 

the astronomical premium increases that some people are being 

told that they have to pay. 

So, let me ask Mr. Douglas Holtz-Eakin, president of the American Action Forum, you mentioned in your testimony that you feel 

it is important for premiums to move to full actuarial risk rates. 

But clearly, many of these rate increases are so drastic that they 

will lead to greater foreclosures and depopulation of the program. 

Wouldn’t this increase taxpayer exposure, because the Federal Government would provide more expensive disaster relief following the 

next inevitable disaster? 

Mr. HOLTZ-EAKIN. Thank you. A couple of things. First, some of 

the testimony seemed to suggest that the rate quotes were inaccurate. So, let’s just stipulate at the outset that these are accurate 

quotes about the cost of flood insurance, and I hope that is the 

case. 

These large rate increases actually serve a valuable purpose. We 

may not be able to control floods and other natural disasters, but 

we can control the capital and economic activity we put in harm’s 

way. And large premium increases say we are putting that activity 

in harm’s way, and people need to know that. And we need to avoid 

that wherever possible. That is a danger. 

And, so, I don’t think the issue is premium increases, per se. The 

issue is, the transition costs for those of modest economic means 

when faced with large price increases. Means-tested transition 

makes sense, but the notion that somehow, we should ignore what 

is being conveyed—that we are locating their homes, businesses, 

and other valuable— 

Ms. WATERS. So, if I may, one of the examples I gave was a prop- erty where the premium was $3,300, and it went up to $56,000. 

And you are saying that it is accurate, and you know it is? And 

what represents the risk? 

57 

Mr. HOLTZ-EAKIN. No, I am saying—I don’t know if it is accurate. 

I am hoping that quote is accurate. 

Ms. WATERS. What was it you wanted us to stipulate? 

Mr. HOLTZ-EAKIN. I wanted to stipulate for this discussion that 

the quote is accurate. If there are mistakes being made, then they 

need to be fixed. I understand that. 

Ms. WATERS. Of course, I won’t agree with the stipulation. But 

let me just say this: You also heard that a lot of the mitigation attempts are programs that have been put in place may not be accurately assessed. You also heard that there is a limit on how much 

local entities can support mitigation. You also heard that the price 

increases are done in mapping based on the community, rather 

than on the individual property. And given all of that, you still 

want to stipulate that these price increases are accurate? 

Mr. HOLTZ-EAKIN. I would hope that they would be accurate. As 

I mentioned in my written testimony, I am in favor of credit for 

mitigation, and down to the individual household level. That is an 

important part of managing risk. There is no reason to be opposed 

to that. 

What I do know is that this program, as with many Federal risk 

programs, has run an economic lawsuit since inception, and that 

suggests a systematic problem with having actuarially fair rates. 

We need to avoid that going forward. 

Ms. WATERS. Of course, we have no control over natural disasters. We have no control over what has happened in Katrina and 

Rita and Isaac and Sandy and on and on and on. And are you saying that—and the question I really raised was—the cost to government and the taxpayers, if we did not have the Federal flood control—the flood program? 

Mr. HOLTZ-EAKIN. If it were the case that the losses in any natural disaster, which we do not control, were the same, regardless 

of how we got the money, I would agree with you, but I don’t. By 

having a correctly-priced insurance program, it sends the incentive 

not to build in those areas most prone to flooding, most prone to 

losses. In that way, we lower the overall losses in a way that we 

wouldn’t if we simply wrote checks and picked up the pieces after 

the fact. 

Ms. WATERS. Let me just say in the last few seconds that I have 

here that we had from Mrs. Capito an example of someone who 

lived high above in a condominium that had flood insurance that 

the price was increasing on dramatically. And the question was, 

how was this determined? And, of course, the answer was, ‘‘Well, 

it was the community overall.’’ 

I cannot agree that the pricing is accurate. I think there are a 

lot of questions. Do you think an affordability study might help 

with us having to have more accurate pricing? 

Mr. HOLTZ-EAKIN. I think a transition, which included a clear 

needs-based supplement for those who face large increases is sensible. But I think to avoid the transition, in my experience, having 

watched this for a long time— 

Ms. WATERS. The affordability study is the transition. 

Mr. HOLTZ-EAKIN. —is that there will never be a good time for 

reforms to get rid of subsidies. And if we put it off for 4 years— 

Ms. WATERS. I yield back the balance of my time. 

58 

Chairman NEUGEBAUER. I thank the gentlewoman. 

And now, the gentleman from California, Mr. Sherman, is recognized for 5 minutes. 

Mr. SHERMAN. Yes, you thought you were all done, and then 

Sherman sneaks in another 5 minutes of questioning. 

Mr. Veissi, can you give us an update based on your expertise 

of what impact these new rates are having on real estate markets 

right now? 

Mr. VEISSI. It is still early, but the newest information that we 

are getting is that it is not just impactful. It is extraordinary across 

the board that the rates will have an impact bar none. We know 

it is not just a coastal issue. It happens to be an issue that attacks 

not just Florida and the Carolinas and Mississippi and Alabama, 

North Dakota, Nashville, Tennessee, and some of the others. 

So, we are seeing for-sale signs today that say, no insurance impact on this property. That tells us very quickly that folks are making determinations at the point of sale on a property that they 

would normally have bought or normally have become invested in. 

It is going to get more critical as time goes on and these insurance 

rates are applied. 

Mr. SHERMAN. Is there anyone on the panel who can help quantify the difference between being in an impacted home and then 

being in the same metropolitan area, same square footage, without 

that impact? Mr. Hecht? 

Mr. HECHT. Congressman, we can say empirically in one of our 

counties, St. Charles, homes that have never flooded and subdivisions that have never flooded have been devalued 30 percent already. So there is empirical basis for that type of comment. 

Mr. SHERMAN. Now is that because the economy in St. Charles 

is bad? There are a lot of places that have had 30 percent declines 

in home values. Can you identify that as a flood insurance issue? 

Mr. HECHT. Yes. That calculation is based on the decreased value 

of the homes because of the increased carrying cost due to the insurance. We actually have one of the fastest growing economies in 

the country right now, so it is not a general phenomenon. It is very 

specific to Biggert-Waters. 

Mr. SHERMAN. Okay. Mr. Veissi, given the confusion that exists 

about rates, what can REALTORS® and homeowners provide a 

prospective purchaser who asks about flood insurance rates? What 

information do you give me when I am there at the open house? 

Mr. VEISSI. There are a couple of things we can do. We can advise our clients about the opportunity to get a current flood certificate. 

Also, I wanted to add that the Rand Institute in California did 

a study and showed us that for every $500 in increase on an insurance policy, the value of that single-family home was decreased by 

$10,000. 

So an insurance policy that went from $1,000 to $3,000 or $4,000 

could impact the value of a single-family home by as much as 

$30,000, $40,000 or $50,000 in equity. 

Mr. SHERMAN. Is that consistent with the information of others 

on the panel? Mr. Rutenberg first, then— 

Mr. BERGINNIS. One thing I would like to add is what we have 

seen after Sandy is a different effect though as well. And so I think 

59 

to have this discussion well-rounded, properties that are properly 

elevated and properly mitigated are increasing in value relative to 

those that aren’t in that area. And so— 

Mr. SHERMAN. Relative to what they would be absent the change 

in the flood insurance? 

Mr. BERGINNIS. Right. And we are seeing some of those increases 

as well. I am concerned. Hopefully, that Rand study—my homeowner’s policy just went up about $500, so I am— 

Mr. SHERMAN. You didn’t realize you lost $10,000 when that happened, did you? 

Mr. BERGINNIS. Yes. 

Mr. SHERMAN. Mr. Rutenberg? 

Mr. RUTENBERG. I am concerned in this discussion that we are 

assuming that the quotes are accurate. And I think someone else 

mentioned that earlier. 

I would expect that if you had a repetitive quote year after year 

from the same agent, it is probably accurate, because it is coming 

from the same database and the same insurance company. At least, 

the delta would be accurate. But if you are buying a house and you 

are out shopping, I am concerned that some people are getting estimates that are not valid. And I have seen more— 

Mr. SHERMAN. Too high or too low? 

Mr. RUTENBERG. Just scattered, sometimes by a factor of 10, 

from personal experience. And I would suspect that there is some 

opportunity in—before the affordability test, before everything else 

is done to work on trying to get better quotes to customers. And 

I am not so sure how to do it. That is another part of the industry. 

But I have seen it from personal experience to be a variable that 

is not tied to what it should be. 

Chairman NEUGEBAUER. The gentleman’s time has expired. 

Mr. SHERMAN. Thank you. 

Chairman NEUGEBAUER. Before we adjourn, I want to thank 

Dustin Parks. Dustin, stand up. Dustin was a detailee from HUD 

working with Mr. Capuano. His assignment concludes today and 

we want to thank him for his service to the committee. 

[applause] 

I would like to thank each of our witnesses again for their testimony today. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

And without objection, we are adjourned. 

[Whereupon, at 4:52 p.m., the hearing was adjourned.] 

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