Flood Insurance Reform Act of 2011

Flood Insurance Reform Act of 2011 - (Sec. 2) Amends the National Flood Insurance Act of 1968 (NFIA) to extend through FY2016 the financing for National Flood Insurance Program (Program).

(Sec. 3) Amends the Flood Disaster Protection Act of 1973 (FDPA) to authorize the Administrator of the Federal Emergency Management Agency (FEMA) to suspend temporarily the mandatory flood insurance purchase requirement for areas designated as having special flood hazards, if they meet certain eligibility requirements.

Authorizes the Administrator, upon request of the relevant local government authority, to extend such suspension period for an additional 12 months if the Administrator finds that more than adequate progress has been made on the construction of a flood protection system for the area. Excludes from such extension certain improved real estate or mobile home properties with new mortgages.

Revises the requirement that the lender or servicer of a loan, in the case of a borrower who has failed to purchase flood insurance, purchase it on the borrower's behalf and charge the borrower for the cost of the premiums and fees incurred. Includes among such premiums or fees those incurred for coverage beginning on the date on which flood insurance coverage either lapsed or did not provide a sufficient coverage amount.

Requires a lender or servicer who receives confirmation of a borrower's existing flood insurance coverage to terminate force-placed insurance and refund to the borrower all force-placed insurance premiums (including related fees).

Requires each federal entity for lending regulation to direct regulated lending institutions to accept private flood insurance if it meets federal flood insurance requirements. Requires each federal agency lender, as well as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), to accept private flood insurance as satisfaction of the flood insurance purchase requirement if it meets such requirements.

(Sec. 4) Amends NFIA to prescribe minimum annual flood insurance deductibles of $2,000 for subsidized rate properties and of $1,000 for actuarial rate properties.

Revises the requirement that additional flood insurance in excess of specified limits be made available to any residential building for which the risk premium is determined in accordance with certain requirements so as to enable the insured or insurance applicant to receive coverage up to an aggregate liability of $250,000. Specifies that such additional flood insurance be made available only to a residential building designed for the occupancy of from one to four families. Applies the $250,000 aggregate flood insurance liability to any single building of that description.

Makes technical revisions to analogous requirements for additional flood insurance in the case of any nonresidential building, including a church.

Sets forth a formula for indexing maximum coverage limits.

Prescribes optional coverage of up to: (1) $5,000 aggregate liability for any necessary increases in living expenses for loss of use of a personal residence, and (2) $20,000 for business interruption with regard to any commercial property or other residential property, including multifamily rental property.

Requires flood insurance regulations to allow payment of flood insurance premiums in installments, at increased chargeable premium rates and surcharges.

Specifies the coverage of a new flood insurance policy on properties affected by floods in progress during the 30-day waiting period before the policy's effective date. Covers damage to the property resulting from such a flood that occurs after expiration of the waiting period, but only if the property has not suffered damage or loss as a result of that flood before expiration of the period.

(Sec. 5) Raises from 10% to 20% of the average of the risk premium rates for the properties concerned the annual limitation on premium increases.

Schedules a 5-year phase-in of chargeable risk premium rates, in annual 20% increments, for flood insurance coverage for an area that has been upgraded to a special flood hazard area (newly mapped risk premium rate area). Specifies a different 5-year phase-in period for a risk premium in the case of preferred risk rate areas.

Limits to the applicable estimated risk premium (actuarial) rate for an area the chargeable rate for: (1) any nonresidential (commercial) property, (2) second homes and vacation homes, (3) single-family properties (built or improved before the end of 1974) sold to new owners, (4) property sustaining over 50% flood damage or over 30% improvement after enactment of this Act, and (5) any severe repetitive loss property.

Prohibits extension of subsidized rates for policies lapsed as a result of the policy holder's deliberate choice.

Makes communities making adequate progress at reconstruction or improvement to 100-year frequency flood protection systems eligible for premium flood insurance rates that would apply if the reconstruction or improvement were completed.

Revises requirements for special flood hazard rates for a community in the process of restoring flood protection afforded by a system previously accredited as providing 100-year frequency flood protection but no longer does so. Requires application of such rates without respect to the level of federal investment or participation in the restoration effort. Allows nonfederal, including private, entities that own, operate, maintain, or repair flood protection systems (instead of a federal agency) to determine whether a flood protection system is restorable.

(Sec. 6) Establishes the Technical Mapping Advisory Council, chaired by the Administrator, to develop new mapping standards for 100-year flood insurance rate maps.

Requires the Administrator to ensure that Council membership has a balance of federal, state, local, and private members, including representatives from the states with coastline on the Gulf of Mexico and other states containing areas identified by the Administrator of FEMA as at high-risk for flooding or special flood hazard areas.

Terminates the Council after five years.

Prohibits the Administrator, until the Council submits proposed new mapping standards, from making effective any new or updated rate maps for flood insurance coverage under the Program that were not in effect as of enactment of this Act, or otherwise revising, updating, or changing the flood insurance rate maps in effect as of such date. Authorizes the Administrator, however, to modify flood insurance rate maps in effect during such moratorium, but only pursuant to a letter of map change.

(Sec. 7) Instructs the Administrator to: (1) establish new rate maps based upon the Council's standards and recommendations, and (2) update flood insurance rate maps accordingly.

Exempts from mandatory flood insurance purchase and compliance requirements property located in a special flood hazard area if the property owner submits an elevation certificate showing that the lowest level of the primary residence on such property is at least three feet higher than the elevation of the 100-year floodplain.

Prohibits the Administrator from: (1) charging a fee for reviewing the flood hazard data; or (2) issuing flood insurance maps, or making effective updated flood insurance maps, that omit or disregard the actual protection afforded by an existing levee, floodwall, pump, or other flood protection feature, regardless of its accreditation status.

(Sec. 9) Requires the Administrator and the Comptroller General each to study options, methods, and strategies for privatizing the Program.

Authorizes the Administrator to implement appropriate private risk-management initiatives to determine the capacity of private insurers, reinsurers, and financial markets to assist communities, on a voluntary basis only, in managing the full range of financial risks associated with flooding.

Requires the Administrator to assess private sector response to a request for proposals to assume a portion of the Program's insurance risk.

Authorizes the Administrator to secure flood reinsurance coverage from private market insurance, reinsurance, and capital market sources, including through an industry flood insurance pool, at reasonable and appropriate rates sufficient to maintain the ability of the Program to pay claims, minimizing the likelihood that the Program will utilize its borrowing authority.

Requires the Administrator to assess annually the Program's claims-paying ability, including its utilization of private sector reinsurance and reinsurance equivalents, with and without reliance on FEMA borrowing authority.

(Sec. 10) Instructs the Administrator to report annually to Congress on the financial status of the Program and of the National Flood Insurance Fund, including current and projected levels of claims, premium receipts, expenses, and borrowing under the Program.

(Sec. 11) Modifies the mitigation assistance grant program for: (1) states and communities to cover mitigation activities that reduce flood damage to severe repetitive loss structures, and (2) property owners in the form of direct grants to implement mitigation activities that reduce flood damage to individual structures for which two or more claim payments for losses have been made under flood insurance coverage if the Administrator determines that neither the relevant state or community has the capacity to manage such grants.

Repeals authority for planning assistance grants.

Changes from flood risk mitigation to multi-hazard risk mitigation the plan a state or community is required to develop to be eligible for mitigation assistance. Requires the plan to examine reduction of losses rather than provide protection against them.

Directs the Administrator give priority to funding activities that will result in the greatest savings to the National Flood Insurance Fund (NFI Fund), including repetitive and severe repetitive loss structures.

Removes beach nourishment from the list of eligible mitigation activities. Adds to the list activities for: (1) elevation, relocation, and floodproofing of utilities (including equipment that serve structures); (2) development or update of state, local, or Indian tribal mitigation plans; and (3) personnel costs for state staff that provide technical assistance to communities to identify eligible activities, develop grant applications, and implement grants.

Directs the Administrator to consider as an activity eligible for mitigation assistance the demolition and rebuilding of properties to at least base flood levels or higher, if required by either the Administrator or any governmental ordinance.

Authorizes grants for eligible mitigation activities including: (1) severe repetitive loss structures, up to 100% of all eligible costs; (2) repetitive loss structures, up to 90% of all eligible costs; and (3) all other mitigation activities, in an amount up to 75% of all eligible costs.

Increases the administrative penalty for a state's or community's failure to provide matching funds.

Limits to $40 million per fiscal year the amount of funding for severe repetitive loss structures.

Eliminates: (1) the grants Program for repetitive insurance claims properties, and (2) the pilot Program for mitigation of severe repetitive loss properties.

Increases the amounts available from the NFI Fund to the National Flood Mitigation Fund (NFM Fund) for specified activities. Declares that amounts made available in the NFM Fund shall not be subject to offsetting collections through premium rates for flood insurance coverage.

Revises requirements for additional flood insurance coverage for the costs of compliance with community land use and control measures to eliminate coverage for properties for which an offer of mitigation assistance is made under the repetitive loss priority program and individual priority property program.

(Sec. 12) Amends the FDPA to direct the Administrator to notify residents of special flood hazard areas annually of the mandatory flood insurance purchase requirement, rate phase-ins for such properties, and related information.

(Sec. 13) Amends the NFIA to require the Administrator to notify: (1) Members of Congress whose districts or states would be affected of any significant action relating to any revision or update of any floodplain area or flood-risk zone, (2) tenants of the availability of contents insurance for property located in a special flood hazard area, and (3) policy holders annually regarding direct management by FEMA of their flood insurance policy and of the option to purchase flood insurance directly administered by an insurance company.

(Sec. 14) Revises notification requirements for the Administrator in establishing projected flood elevations for land use purposes. Requires direct written first class mail notification to each owner of real property affected by the proposed elevations about the status of such property and the process for appealing the flood elevation determination.

(Sec. 17) Amends the Real Estate Settlement Procedures Act of 1974 (RESPA) to require a lender's good faith estimate for loan applicants to disclose: (1) the availability of flood insurance for residential real estate both in and out of a special flood hazard area, and (2) that the escrowing of flood insurance payments is required for many loans.

(Sec. 18) Amends the NFIA to provide reimbursement for costs incurred by homeowners and communities obtaining letters of map amendment due to a bona fide FEMA error.

(Sec. 19) Directs the Administrator, when updating flood insurance maps, to communicate with communities located in areas where flood insurance rate maps have not been updated in 20 years or more and state emergency agencies to resolve outstanding issues, provide technical assistance, and disseminate all necessary information to reduce the prevalence of outdated maps in flood-prone areas.

(Sec. 20) Requires the Administrator, when revising or updating areas with special flood hazards, to provide each owner of a property to be newly included in such an area a copy of the proposed revised or updated flood insurance maps,together with information regarding the appeals process.

(Sec. 21) Declares eligible for flood insurance any property otherwise in compliance with the Program even it has a swimming pool located at ground level or in the space below the lowest floor of a building after November 30 and before June 1 (outside hurricane season) if the pool is enclosed with non-supporting breakaway walls.

(Sec. 22) Specifies information for an insured having flood insurance coverage by the Administrator or by a company, insurer, or entity offering flood insurance coverage under the National Flood Insurance Program (a participating company) when the insured also has wind or other homeowners (multiple perils) coverage from any company, insurer, or other entity covering property that is covered by the flood insurance.

Requires the Administrator and the participating company, upon the insured's request, to provide to the insured: (1) a copy of the estimate of structure damage, (2) proofs of loss, (3) additional documentation relied upon by the Administrator or participating company in determining whether the damage was caused by flood or any other peril, and (4) the final determination on the claim.

Applies this requirement only with respect to a request made after: (1) the Administrator or the participating company, or both, have issued a final decision on the flood claim involved; and (2) resolution of all appeals with respect to such claim.

(Sec. 23) Authorizes the Administrator to refuse to accept the transfer of the administration of flood insurance policies that are written and administered by any insurance company, other insurer, or any insurance agent or broker.

(Sec. 24) Directs the Administrator to: (1) notify a local television and radio station when establishing projected flood elevations with respect to certain communities; and (2) grant an additional 90-day extension of the initial 90-day period for appeals if an affected community certifies that there are property owners or lessees who are unaware of the statutory period to appeal proposed flood elevation determinations, and the community will use the time extension to notify those affected.

(Sec. 25) ) Directs the Administrator to establish a separate National Flood Insurance Reserve Fund to meet expected future obligations of the flood insurance Program. Prescribes a reserve ratio and phase-in requirements for the Fund.

(Sec. 26) Amends the Housing and Community Development Act of 1974 to make eligible for assistance under the Community Development Block Grants (CDBG) Program: (1) certain activities supplementing existing state or local funding for administration of building code enforcement by local building code enforcement departments, and (2) floodplain management outreach and education activities of local governmental agencies to encourage and facilitate purchase of flood insurance protection by owners and renters.

(Sec. 28) Directs the Administrator to: (1) report to Congress on procedures to limit the percentage of flood insurance policies directly managed by FEMA to a maximum of 10% of the aggregate number of all flood insurance policies in force under the Program, and (2) reduce to a 10% maximum the number of flood insurance policies directly managed by either FEMA or its non-insurer direct servicing contractor.

(Sec. 29) Directs the Administrator and Comptroller General each to study options, methods, and strategies for offering and incorporating voluntary community-based flood insurance policy options into the Program.

(Sec. 30) Directs the Administrator to study the impact, effectiveness, and feasibility of amending the NFIA to include widely used and nationally recognized building codes as part of the floodplain management criteria.

(Sec. 31) Directs the National Academy of Sciences to study methods for understanding graduated risk behind levees and the associated land development, insurance, and risk communication dimensions.

(Sec. 32) Requires the Administrator to: (1) review the processes and procedures for determining that a flood event has commenced or is in progress for flood insurance purposes, and for providing public notification that such an event has commenced or is in progress; and (2) plan how to repay within 10 years all amounts owed pursuant to NFIA on notes and obligations approved by the President, including any previously borrowed but not yet repaid.

(Sec. 34) Prohibits any cause of action or claim from being brought against the United States for violation of any notification requirement imposed by this Act.

(Sec. 35) Authorizes the Secretary of the Army, upon request of a governmental entity, to evaluate a levee system that was designed or constructed by the Secretary for the purposes of the National Flood Insurance Program.

Written by the nonpartisan Congressional Research Service. All summary versions on Congress.gov