The House has passed a flood insurance reform bill by a 416-4 vote that eliminates subsidized premiums on vacation and second homes and commercial buildings -- affecting an estimated 450,000 properties.Federal flood insurance premiums on those properties would increase 15% a year until they reach the "applicable risk premium rate." During congressional debate, the House also agreed that homes built before 1975 (known as pre-FIRM homes) should not enjoy subsidized premiums if they are purchased after enactment of the bill. "My amendment would simply require any purchaser of a pre-FIRM residential home to pay a phased-in, actuarially correct flood insurance price," Rep. Scott Garrett, R-N.J. said. The flood bill (H.R. 4973) also increases penalties on mortgage lenders who fail to require the purchase of flood insurance or allow coverage to lapse during the life of the mortgage. The Flood Insurance and Modernization Act raises the penalties for lender noncompliance from $350 to $2,000 per violation, with a $1 million cap. The bill also requires notice of availability of flood insurance and escrow for flood insurance in RESPA good-faith estimates.

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