Passage of the flood insurance bill by the House and Senate on Friday also ensures against another temporary shutdown of the program.
Since 2008, Congress has passed 18 short-term extensions of this program and there were several lapses where the Federal Emergency Management Agency could not issue new flood insurance policies.
“The long-term extension bill passed by the House provides greater certainty for the nation’s housing market,” said House Financial Services Committee chairman Spencer Bachus, R-Ala.
The House passed the bill by a 373-52 vote and the Senate cleared the measure by a 74-19 vote. President Obama is expected to sign the flood bill, which is part of a larger legislative package containing a highway transportation bill and student loan bill.
The NFIP reform bill phases out subsidized insurance rates on second and vacation homes, properties with repetitive flood claims and commercial properties.
Once the bill goes into effect, the Federal Emergency Management Agency will charge the full rate for any properties not previously insured and properties where the flood insurance policy has lapsed.
Mortgage lenders must escrow flood insurance premiums and there are monetary penalties for failing to comply with this requirement.
It appears the lawmakers carved out an escrow exemption for community banks with less than $1 billion in assets.
The bill also addresses the problem of determining claims caused by flood and wind damage in a hurricane.
The lawmakers directed the National Oceanic and Atmospheric Administration to establish a standard formula to determine and allocate wind losses and flood losses.