Providing for consideration of the bill (H.R. 4973) to restore the financial solvency of the national flood insurance program, and for other purposes.

Mr. Chairman, I want to thank the gentleman from Massachusetts, the gentleman from Ohio.

Mr. Chairman, not everything our Nation does is wrong. And one of the things our Nation does that the private sector wouldn't do or chose not to do was insure people against flooding. And that is a very good program.

When you consider that the predictions are that within the next 50 years 80 percent of all Americans will live within 50 miles of a coast line, then protection from flood insurance, protection from hurricanes is very important.

In southern Mississippi I have had very, very few complaints about the Federal flood insurance program. I have had tens of thousands of complaints about how people were treated by the wind coverage. So I want to commend the gentleman from Massachusetts and the gentleman from Ohio for raising the amounts that people can buy coverage for.

Most of southern Mississippi had older homes. People had lived in them for decades. And now they, and I, are going through simultaneous sticker shock. Houses that you may have bought 20, 30 years ago for $50,000, you have now got to replace for a heck of a lot more than that. So by raising the amount that people can cover themselves from $250,000 to $335,000 is a huge improvement. Also, raising the contents up to $135,000 again is a huge improvement. I think as people put a pad to their contents after they woke up the next morning and discovered that they were gone, I think everyone was surprised that they owned more than they thought they did and they lost more than they thought they did. So again this is a move in the right direction.

I want to commend the committee for putting in the money for the new flood maps. Water in Bay St. Louis got to be 26 feet above sea level in some places. That was unprecedented since the Europeans landed over 300 years ago. And the Navy Oceanographic Lab tells us we are in for 10 years of this. So, again, since this is a public entity funded with taxpayer dollars, I think it is very important, whether it is Pensacola, Florida, or Gulf Shores, Alabama. Anywhere in coastal America I think it is important that we know the propensity to flood, take adequate steps to minimize losses in future hurricanes.

I would also like to commend the committee for working with me on trying to address the Katrina fraud. Citizens of this country are noticeably upset that some of the generous money given to them, either as taxpayers or through groups like the Red Cross, was abused, that people milked the system, in some instances, to do things like a sex- change operation.

I happen to think the biggest fraud of all, though, Mr. Chairman, came from the insurance industry. And I will walk you through this. Under the National Flood Insurance Plan, we count on the private sector not only to sell the insurance policy; we count on the private sector to adjudicate the claim.

Now, wind damage is paid for by a private company. Flood damage is paid for by the Nation through the National Flood Insurance Plan.

So imagine yourself, a 25-year-old insurance adjuster. You have visions of being a company man or getting that next promotion. You may even own stock in your company. You are sent out to adjudicate a claim on a house that is no longer there, knowing that if you said the wind did it, it is coming out of your company's pocketbook. If you say the water did it, it is coming out of the taxpayers' pocketbook.

The FBI says that fraud is a crime of opportunity. And I think under this system, we have given the insurance industry the opportunity to stick the bill to the taxpayers every time there was any question. And I think they did.

Is it a coincidence that the insurance industry reported $44 billion in profits last year, in the same year that the National Flood Insurance Program lost $25 billion? Are they that much better at what they do? I don't think so.

I think they took claims that legitimately should have been paid by the wind policies and stuck it to the taxpayer to the tune of millions, if not billions, of dollars. And I am going to

offer an amendment in a little while to ask for an Inspector General's report to see if that is true. And if it is true, then we need to come back and change the system so that we don't just count on an insurance adjuster blindly sending the bill to the government and the government paying it every time.

Think about it. If the Members in this room want to be reimbursed for their trip to the airport, they have got to turn in a taxi receipt for 15 or 20 bucks. But in the case of the National Flood Insurance Program, Allstate, State Farm, Nationwide, fill in the blank, can bill the government for hundreds of billions of dollars, and we pay that claim without even bothering to look into this. That is wrong. It is a system ripe for abuse. And I am convinced it has been abused.

Last, and several other speakers have touched on this, we need to rethink the whole flood insurance program. Whether you are from Florida, Georgia, Alabama, Mississippi, any coastal State, we don't need people who have invested their life savings in their houses getting abused by their insurance company. And let me tell you, it is happening every day.

Senator Trent Lott, one of the most powerful men in the Senate, feels like the only way he is going to get justice out of his insurer is to sue them.

Federal Judge Lou Guirola had to drop hearing cases, like Senator Lott, so that he could sue his insurance company.

Now, when U.S. Senators and Federal judges feel like the only way they are going to get justice is to go to court themselves, what is it like for the grandmas and grandpas out there? What kind of fair shake are they going to get? And the answer is they are not getting one.

So if the private sector is not going to do it fairly, if they are not going to do it right, then maybe we need to expand the National Flood Insurance Program and call it the National Hurricane Insurance Program. Because let me tell you what I think is going to happen. We spend a lot of money to send the hurricane hunters out there for the Air Force, a lot of money to tell us where these storms are going to hit and when. We have satellites up in space to tell us about these storms. Why do we do that? So that people will get the heck out of there before a storm hits.

Based on what has happened, based on the tens of thousands of southern Mississippians who have been denied legitimate claims for their wind coverage, I am convinced in the next hurricane people are going to die needlessly because they stay behind in their home with a camcorder so they can prove to the insurance adjuster whether it is wind or water. That is wrong. It is completely contrary to why we fund the hurricane hunters; it is completely contrary to why we put those satellites in space. A person should not have to die on his property to get justice from his insurance company. And although there is no Federal regulation of the insurance industry, maybe the abuses that took place after Katrina will cause some of my colleagues to rethink this.

So, again, the bill takes some very important steps on allowing people to purchase more flood insurance, to purchase more contents insurance. It is taking the right step on getting the flood maps much more accurate, not so much for the guys who have lived there for 20 or 30 years, but for all the new folks who are moving to the coast who need to know if their property has a propensity to flood.

So I am grateful for what has been done. I have offered some observations of what needs to be done.

Mr. Chairman, I offer an amendment.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, when the National Flood Insurance Program was put together, a couple of steps were taken to minimize the administrative costs of that program. One, under the National Write Your Own Program, allowed the private sector, companies like Allstate, State Farm and Nationwide, to sell this policy, get a fee for selling this policy, but the cost of actually paying the claims would be borne by the Federal Government. There is really nothing wrong with that. The problem came in when at the same time they allowed the same companies to adjudicate the claim in the aftermath of the storm.

The example I used earlier is that you have got a young claims adjuster. He is a company man. He works for State Farm; he works for Allstate or Nationwide. He has visions of being promoted to a manager. He has stock in that company. He wants to go far.

He is sent out to what is now a slab that just a few days ago was someone's home. There is nothing there. And he has to determine whether that house was destroyed by wind or by water.

In the case of south Mississippi, the Navy Oceanographic Lab tells us we had 6 to 8 hours of maximum hurricane winds before the water ever got there. In the case of the little town of Bay St. Louis, that meant you had winds for 6 to 8 hours from 100 miles an hour up to 150 miles an hour before the tidal surge came in and destroyed the evidence of what the wind did.

So this claims adjuster, who wants to go far with the company, can decide whether his company is going to pay

that claim through the wind pool, or whether the taxpayers are going to pay through the flood insurance program.

The FBI says that fraud is a crime of opportunity. No matter how well-intended Congress was when they wrote this, they created the opportunity for a heck of a lot of fraud. In fact, I think the biggest fraud that occurred after Hurricane Katrina wasn't people getting an extra FEMA check or two or three extra checks from the Red Cross, although that is deplorable. The biggest fraud occurred at the corporate level where the insurance industry made a corporate decision to, whenever possible, blame flooding every time and stick the taxpayers with bills that they should have paid.

Mr. Chairman, last year the insurance industry reported a $44 billion profit after everything. Last year Federal flood insurance lost $25 billion. That is the reason this bill is on the floor today. I don't think it is a coincidence, because I think what happened was whenever given the opportunity, the insurance industry stuck the taxpayer with bills that they should have paid.

So what I am asking for is for the Inspector General to look into this and hopefully use the Fraudulent Claims Act, which requires treble damages for anyone who submits a false claim to our Nation, in addition to a $5,000 or $10,000 fine every time a false claim is submitted. Because I am convinced that is precisely what happened.

Mr. Chairman, after we are told that that is what happened, I hope this Congress will come back and find a way to where we as a Nation won't just blindly accept the claims of an insurance industry when we pay that bill.

I used the analogy before. If Mr. Oxley, if Mr. Pickering, any Member of this body wants to be reimbursed for their trip to the airport, they have got to submit a claims ticket from that taxi driver for the 15 bucks, or they don't get paid.

But in the instance of national flood insurance, these insurance companies submitted claims for $100,000, $200,000, $250,000, and the taxpayer paid it every time without anyone second guessing. That is the opportunity for fraud, and I believe that fraud took place.

So, Mr. Chairman, I don't know of anyone who in their right mind could oppose this, I don't know of anyone who wants to see our tax dollars used unwisely, and I don't know of anyone who wants to see the National Flood Insurance Program defrauded or the subject of fraud.

So, again, it is my understanding that Mr. Oxley will accept this amendment. I very much appreciate that. I hope that when the Inspector General report comes back 6 months from now that the next Congress will take steps to take away this opportunity for fraud.

I yield to the gentleman from Ohio.

Again, Mr. Chairman, I very much thank the gentleman from Ohio, and I thank the gentleman from Massachusetts.

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

Mr. Chairman, will the gentlewoman yield?

Me, too.

Mr. Chairman, I will just say that it would certainly be my intention and I think that of whoever the successor is to my friend from Ohio will be next year to take this seriously; that is, this is a study that will not simply languish.

I think it has been indicated there are some concerns about the impact of a fully fiscally responsible program on people, low-income homeowners, and that will be helpful as we try to work out an approach to that.

If the gentleman would yield, I am perfectly prepared to offer support subsequent to the thanks. Sequence doesn't seem important.

If the gentlewoman would continue to yield, we also find the amendment very acceptable.

If the gentlewoman will yield, we also accept the amendment.

Mr. Chairman, I claim the time in opposition.

Mr. Chairman, I yield myself such time as I may consume.

First, to the extent there is an issue here, it is being addressed in the wrong place, that is, if we have decided to get benefits from the Federal flood insurance program, any cost that accrues from that ought to be part of the flood control program. That is, it does not make sense from the budgetary standpoint to give a hit to the Federal flood

insurance program because of a Federal flood control program.

That is what this amendment does in this structure, that is, we pay for the Federal flood control program over here, and that will result in some people under this amendment now getting Federal flood insurance and not paying anything for it. It will, therefore, undercut our efforts to make the Federal flood insurance program a fiscally sound one.

I yield to the gentleman from California.

No, the gentleman misses my point entirely. I was talking now, assuming that point, as to where the compensation should come from. I do not think it is reasonable to charge the Federal flood insurance program. We have problems with Federal flood insurance.

If in fact the gentleman wants to pursue that principle, it ought to be with regard to the financing of the flood control programs. That is, if as a consequence of flood control there is going to be this problem, I do not think, Mr. Chairman, that we ought to charge the Flood insurance program with it.

The second thing I would say is that the gentleman talked about people on fixed incomes. Several times today in the amendment by the gentleman from New Jersey (Mr. Garrett) and an amendment that was going to be offered by the gentleman from Texas (Mr. Green), the question of some special consideration for lower-income homeowners has come up. I am all in favor of that. I think we should go forward with that. I think we ought to be looking at some kind of relief for lower-income people, and I would include those who will be affected this way and others.

But where we are talking about people who are quite prosperous, the Federal flood control programs are done for a good reason; and it may be, by the way, that while, yes, you, as a result of the Federal flood control program have some more costs, you may also get some benefits. I don't think you can do a general principle in that. You may benefit.

But the main problem I have is this: the result of this amendment, if adopted, would be to weaken the principle of the fiscal balance and integrity of the flood insurance program.

It would say that people would get flood insurance who were at risk of flooding and either pay nothing for it or pay far less than they should be. I hope this amendment is defeated.

I would then be glad to join the gentleman in talking to the committee of jurisdiction, to say when you are doing a flood control program take this into account, and maybe you want to put some funding into that. But I do not want to weaken the fiscal integrity of the flood insurance program.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield myself 1\1/4\ minutes.

Mr. Chairman, once again, the gentleman totally misrepresents my argument. I didn't say everyone was affluent. I said, in fact, that those who are of low income ought to get the relief here, as they should elsewhere in the program. But some will be affluent. The point, however, is this.

If you give some people flood insurance for free, as this amendment would do, then everybody else who gets flood insurance pays for it. The flood insurance program is supposed to be self-financing, so it will result in increases in flood insurance premiums.

The gentleman said, if it is going to impose costs, that should be taken into account. That was precisely my original point. The costs to people who will now have a flood insurance obligation ought to be taken into account when you do the benefit/cost analysis of the flood control program. But that is not what happens.

Under the gentleman's amendment, we have two separate processes. You decide to do flood control; and then, having done flood control, if that results in some people having to pay flood insurance, the flood insurance program gets stuck with it. It has nothing to do with the financial side of flood control.

I agree we should look at that but from the same source the flood control programs come in. Telling everyone who now pays flood insurance premiums that they will be subsidizing these people is also an unfairness.

As the gentleman said, if you start this principle of I was here first and then the flood came, I don't know how extendable that would be. I think it is a mistake to set the precedent that some people will get flood insurance for nothing.

Mr. Chairman, how much time is remaining for me?

I yield to the gentleman from Oregon.

Mr. Chairman, we debated earlier an amendment by the gentleman from New Jersey, which as adopted would put residential properties into the phase-in. This would take nonresidential properties and second homes out of the phase-in.

I believe it would be a mistake and could result in a severe economic shock to a number of communities. We are talking about, in the bill, accomplishing the goal that this amendment accomplishes.

The question is, how quickly do you do it? We have a phase-in to full actuarial rates at 15 percent a year. For some individuals who may own an isolated second home, that is one thing. We have many communities in this country where the basis of their economy is second homes, vacation homes and also facilities that service vacation homes. To immediately raise all the insurance rates on all of those properties in that community seems to me to subject them to an economic shock which is unwise.

The 15 percent rate, we think, is an unreasonable one. We are talking about a period of years, 5 or 6 years, before you get to the full amount.

But that is the issue. Do you go to these communities, and, again, we do have, and that has been one of the issues here, people who bought under certain assumptions, people who paid for property figuring a certain amount. Vacation homes is one thing. People brought commercial properties. People figured out, okay, I bought this property. This is how I am going to make my living. How can I make money on this? What is the cash flow?

And the insurance premiums are a part of it. To increase those insurance premiums in 1 year, without a phase-in, could threaten the viability from small businesses, small business people who have been careful about calculating their risk.

We have given them the 15 percent increase. There was obviously resistance to that. There were people in shoreline communities and vacation communities and elsewhere who don't like the notion of getting to actuarial soundness.

But to do it without any phase-in at all, to do it overnight, is a problem, not just for the second homes, and maybe people are less sympathetic to people's vacations, but with noncommercial property small business owners. You are talking about a significant, immediate significant increase in the insurance of small business owners. That seems to me an unwise thing for us to do when we can get there a little bit slower but get there with the phase-in.

I would remind people that, even with the phase-in, the Taxpayers Union, Citizens Against Government Waste support this bill. I do not think it is a mistake for us to be gradual, not taking forever, 5 or 6 years, in hitting business owners, small business owners with a very significant increase in their flood insurance.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, first, you don't get $500,000. There is a cap.

Secondly, we do agree that people should reach to full actuarial amounts. It depends on when.

Third, I would say, every time something comes up, there are cost subsidies.

People in my district don't grow much corn or much wheat, and we pay some subsidies. There are people who don't have any public transportation, and they do.

This is one country. The government is not a supermarket where you go in and pay for only exactly what you buy off the shelf. There is some joint effort.

But the other problem is the gentleman from New Mexico has not described his amendment completely.

What about small business people, he says, second homes and other properties? You have that problem with people who have businesses. What do you do with smaller businesses, people who have brought businesses in these vacation areas who are trying to make a living and who made a calculation based on insurance? What about them? These are not necessarily fat guys. What do you do to them when you immediately and without any phase-in at

all give them what could be a very significant increase in their insurance?

So that is the problem that we have. That is where we have the difference with our friend from New Mexico, not simply with regard to the second home but to the businesses.

Mr. Chairman, I would reserve the balance of my time.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, there are two aspects that have to be considered, one, the impact on vacation communities. It is not only wealthy people. You are talking about the businesses, the hotel owners, the small business people, the restaurant owners, the rooming house owners. They would get a heavy impact here. Cumulatively, if you affect all the commercial property in one of these areas, then you will also affect the whole area.

The economic impact on small business people and on entire communities of a 100 percent overnight significant increase in insurance is not something we ought to be inflicting on people. The phase-in is reasonable. They should be getting actuarial rates but at a reasonable pace.

Mr. Chairman, I demand a recorded vote.

Will the gentleman yield?

Mr. Chairman, I want to say, as I said before, we are running here a national program. And if it becomes 50 separate State programs or a couple of thousand separate county programs, you lose the insurance principle.

And it is also the case, and I understand that there are programs into which Massachusetts pays more than it gets back. Under Medicaid, we get a lower percentage of reimbursement than other States do. We have public transportation and we benefit. But we don't have much that is subsidized agriculturally.

I think the notion that every State can have a balance sheet destroys, the Articles of Confederation embody that principle, but not the Constitution.

You cannot run a national program based on need, based on response to situations on a nationwide basis if you have this kind of a balance thing.

So I agree, we should be pushing FEMA to do the right thing; but if we begin to pick and choose based on one State, you know, we will have a situation where every State will be looking to make money and none will be paying in, and pretty soon there won't be anything left.

Mr. Chairman, I appreciate the gentleman's courtesy in permitting me to speak on this, and for his leadership, along with the chairman, Mr. Oxley, and my friend, Mr. Baker. This is truly important bipartisan legislation to address the flood insurance program's challenges both in the short term and the long term.

I strongly support this legislation and appreciate the willingness of the committee staff to work with people outside the committee to be a part of the process. Those of us here on the floor have known for a long time that the flood insurance program, while an invaluable asset to communities in the floodplain, is not functioning as originally designed. Hurricane Katrina taught us we cannot just let the status quo continue, or the flood insurance program will cease to function. It will be in bankruptcy or people will lose their tolerance for Federal bailouts.

This bill is an excellent start, but you can be guaranteed that it is not the last time we will be talking about these changes on the floor. There are differing views about what needs to be done. Some have recommended making the program actuarially sound, and I agree with those measures. But one thing we have learned from Mr. Baker and from Mr. Taylor is that we have to be sensitive to the people who live in flood-prone areas. They are not just statistics of repetitive flooding, and they are rarely homeowners who are gaming the system. These are people caught up in the cycle of flooding and rebuilding who want to take steps to reduce their vulnerability.

In 2004, we did pass a bill to provide mitigation assistance to severe repetitive-loss property owners. We found that these repetitively flooded properties, which constitute just 1 percent of all the properties in the program, accounted for 25 percent of the flood loss dollars. Addressing these properties, we wanted to help move people out of harm's way, either literally, by buying them out, or helping them take mitigation actions, such as elevation.

Unfortunately, the repetitive-loss pilot project in the 2004 bill had not been fully implemented and we were not able to see the positive impacts before Hurricane Katrina. That is why I am glad the bill before us extends the pilot program so that it will have a chance to work. It also goes further to strengthen the flood insurance program and make it more fiscally sound over the next 50 years.

Some have argued that all properties owners who enjoy artificially low flood insurance rates should be required to pay actuarial rates. This would increase the premium enough to make the program more actuarially sound, saving $1.3 billion. But while I agree the program should move closer to risk-based rates, the response of policyholders to the loss of the subsidy is unclear.

The CBO estimates that some would reduce their amount of coverage or drop flood insurance all together. Many of these subsidized properties are second homes or vacation homes, and the legislation addresses these and I think is a good compromise. Phasing in risk-based rates for second homes will also ensure that families in New Orleans and Mississippi and other flood-prone areas that rely on flood insurance won't be forced to pay artificially high rates to subsidize somebody's second home or vacation home.

The bill also helps encourage participation in the program. Many people living in the floodplains do not have flood insurance now. Less than 40 percent of the property owners who are required to buy insurance actually do so.

In parts of Mississippi and Alabama, hit hardest by Katrina, the coverage rate was only 15 percent. That means that people did not have access to insurance payouts to make them whole, and they are relying on grants and loans from the disaster relief programs that are paid by the taxpayer.

The challenge is figuring out how to make sure that more people who are supposed to have flood insurance do so, and this bill helps the situation by increasing the penalties levied for nonenforcement of Federal mandatory purchase requirements.

It also includes an important study on how to better enforce mandatory flood insurance.

The bill also addresses the inaccuracy and inadequacy of flood insurance maps. We are going to talk a little about this later in the day.

Current flood insurance is required only where there is a 1 percent chance of a flood on an annual basis and not in other low-lying areas where surges are likely to follow major storms. Many of the people who flooded in Katrina did not technically live in the floodplain. They were out of this 100-year cycle, or they lived behind levees and did not realize they should have flood insurance.

These updated maps are important, because FEMA uses them to issue flood elevation requirements. Communities want to have the confidence that their residents are paying the right amount for flood insurance, and we should be loathe to tinker with that.

In addition to directing FEMA to develop more sophisticated maps, this legislation authorizes FEMA to study the implications of requiring flood insurance behind the levees. This is a very important part of the bill. I don't think it has been given the proper attention by more of us in Congress. I hope that we will move towards requiring flood insurance for those situations.

The saying goes, there are only two kinds of levees, those that fail and those that will fail. But this study moves us in the right direction.

While this bill, I think, sets the stage, for moving us in the right direction, simple, common-sense steps strengthen the program and bring together a vast, diverse range of people, from environmentalists to fiscal conservatives, people in real estate, and most important, most important, people whose lives we saw torn apart living in flood-prone areas.

I deeply appreciate the work of this committee and our colleagues in making important steps that are going to make a difference for people for generations to come.

Mr. Chairman, I seek time in opposition to the amendment.

Let me say, I appreciate the intent that is offered by the sponsors of this amendment. I was prepared, however, to argue rather strongly in opposition in terms of the reimbursement mechanism that was involved, but I understand that that has been stripped out and it is now just purely a notification. While I am hopeful that, as this works its way through the process, we can deal with making sure that the notification process doesn't get in the way of trying to move this in an orderly fashion, I am not prepared to demand a rollcall or be cranky about it, because I do think you have adjusted your amendment so that it loses its onerous nature in the way that it was originally filed.

I appreciate the direction you are going and would look forward to working with the gentlemen to make sure that this furthers the public notification but does not bog down the process unnecessarily. As I say, I appreciate the direction that you are going.

I yield to the gentleman from California.

I personally feel more comfortable about that. I didn't know it when I claimed time in opposition because I had some outdated information. I didn't realize how fast this legislative train was rolling, but I feel better now.

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

Mr. Chairman, I would claim the time in opposition.

Mr. Chairman, I would yield myself 3 minutes.

Let me say, I appreciate the gentleman's deep interest in making sure that we are moving forward with reform in the flood insurance program and that we are dealing with some of the idiosyncratic ways that there are some folks that never get out of being an exception. With all due respect, that the approach that has been adopted by the committee is one that over the long run is going to be the most advantageous.

I share your concern, but as I have been working with the floodplain managers from the various States around the country, the people on the ground are concerned about the impact that the rapid movement towards dealing with these other subsidized residential properties would have. There is a very real problem because a lot of these properties do change hands frequently, in knowing what the impact is, and that many people would end up not seeking subsidized property, that communities may opt out, all this could end up being counterproductive. Particularly as it relates to the area, and again I referenced in my opening comments being sensitized by Mr. Taylor and by Mr. Baker, about some of the practical realities, particularly for low-income communities. While it seems that this would be a way to phase it in only when the property changes hands, this would have the practical effect of discounting the value overnight to the people who own these properties, many of whom may be low income. So it would depress the price of the homes that they own because the seller would be subjected to the higher premium.

You and I know that in the long run that is a more rational policy for the taxpayer and for the people who hold those policies, but there is a psychology that is at work with some communities and with some owners and it may well be counterproductive.

So, with all due respect, I would suggest that what we ought to be doing is looking for ways to phase it in over time with these communities, that we deal with emphasizing mitigation like we had in the 2004 legislation, because I fear there may be a double whammy, where communities are less interested in participating and that you may be penalizing some of the very low-income property owners in a way that I don't think any of us want.

So while I sympathize with the approach, while I applaud the committee for advancing the boundaries, this is one area where I would suggest that this, what looks like a simple phase-in, actually may not be a simple phase-in and may have unintended consequences.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield 1 minute to the gentleman from Massachusetts (Mr. Frank).

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, I appreciate what the gentleman is saying. I have spent the last 6 years trying to inject some fiscal responsibility into the program. I have supported the work that the committee has done. But along the way, I have been sensitized to some of the impacts that we don't want to have that are unintended in terms of discouraging participation.

So as you are working with the committee in terms of refining this, I would hope that there would be some sensitivity, if this amendment passes, to the impact on low income.

For instance, one of the unintended consequences may be driving people who are in this circumstance to be seeking financing from sub prime lenders there by avoiding flood insurance, by very expensive financing mechanisms. It ought to go hand in hand with what we do in terms of having more mandatory coverage so there aren't people that are sort of drifting along, and that it doesn't have unintended consequences for having people and communities opt out, or for low- income people, being unduly disadvantaged. I sympathize with what you are saying, and I would be happy to work with you as well.

Mr. Chairman, I offer an amendment.

Mr. Chairman, I thank the chairman very much. I thank the Speaker, and I thank this extraordinary effort on behalf of my amendment.

My amendment includes a provision to the Government Accountability Study on the status of the National Flood Insurance Program before the changes that will be in effect with the enactment of this Act.

This amendment seeks to identify any inconsistencies in eligibility standards for coverage.

As I said earlier, this is an enormous step toward helping homeowners get out of poverty when they lose everything. Insurance is just that.

I thank Mr. Baker, I thank Mr. Oxley of the full committee, Mr. Frank of the full committee, the ranking member of the subcommittee, Ms. Waters, and the chairman of the subcommittee, Mr. Ney. This had to be a yeoman's task of bipartisan effort. And all of my other colleagues on the jurisdiction.

And might I just add, I thank Mr. Frank for including my eminent domain amendment in previous legislation on this issue dealing with Katrina, but the overall question of flooding. This bill develops an appropriate reform on the demands on flood insurance in times of natural disaster, such as what we saw with Hurricanes Katrina and Rita.

The Government can serve a crucial role in the ability of our Nation to be resilient to natural disaster. This program, for instance, provides for properties located in low to moderate risk areas to be eligible to purchase flood insurance policies for premiums as low as $112.

With FEMA being led by a new director, and knowing that under Homeland Security, a committee that I sit on, that we want to reform, we want to make this system work for those who have experienced a disaster, then this legislation is a step toward making it work.

In 1968, Congress created the National Flood Insurance Program in response to the rising costs of taxpayer-funded disaster relief for flood victims and the increasing amount of damage caused by floods. The NFIP makes federally backed flood insurance available in communities that agree to adopt and enforce the floodplain's management ordnances to reduce future flood damage.

The NFIP is self-supporting for the average historical loss year. This means that, unless there is a widespread disaster, operating expenses and flood insurance claims are financed through premiums collected.

According to a RAND Corporation study conducted for the Federal Emergency Management Agency, nationwide about 49 percent of single family homes in special flood hazard areas are covered by flood insurance from the National Flood Insurance Program. In the South and West, the percentage is higher, about 60 percent. However, outside of the high-risk areas there is a steep drop-off in coverage. Only about 1 percent of homeowners purchase flood insurance in these low-risk areas.

We can see by what is happening in this region, in the Maryland, Washington, Virginia region, that we need to have a sensitivity to the need for flood insurance because we cannot predict the weather. My district in Harris County had only a 25 percent market penetration rate, which means that only one in four households was covered with a flood insurance plan. Given the extent of damage and flooding from circumstances as extreme as Hurricanes Katrina and Rita and as common as our recent storms last week, this rate is unsustainable for my constituents and others around the Nation.

As we all know, many Members of Congress have been fighting to make their constituents whole, and so we know that it has been important to understand what happened.

It is important to remember that often residents will not receive Federal aid for flooding in the disaster area, but, on average, households can receive $700 from organizations such as the Red Cross, but this amount is clearly not enough.

So this particular amendment requires the GAO to establish the extent to which eligibility standards for pre-FIRM properties were inconsistent and resulted in disparities in coverage among such properties and their owners. That can be a narrow and selective study so we can have this as part of the larger report. The intent is to discover whether or not the application of eligibility standards remained consistent and, if not, whether some homeowners who should have been eligible for flood insurance did not receive it.

We hope with this amendment that the GAO study will be able to answer the following question: Has there ever been a case where someone should have gotten insurance but did not?

A small, isolated selection of cases will help bring about this very important data and add to this legislation and add to the studies that are necessary to make hard-working homeowners and others who desire the American dream to be made whole in the face of terrible disasters.

With that, I would ask my colleagues to support this amendment.

My amendment includes a provision to the Government Accountability Study on the status of the national flood insurance program before the changes that will be in effect with the enactment of this act. This amendment seeks to identify any inconsistencies in eligibility standard for coverage.

First, let me say that I applaud Mr. Baker, Mr. Frank, and my other colleagues on committees of jurisdiction who developed a bill that appropriately addresses the demands on flood insurance in times of natural disaster, such as what we saw with Hurricanes Katrina and Rita. The government can serve a crucial role in the ability of our Nation to be resilient to natural disaster. This program, for instance, provides for properties located in low-to-moderate risk areas to be eligible to purchase flood insurance policies with premiums as low as $112.

In 1968 Congress created the National Flood Insurance Program (NFIP) in response to the rising cost of taxpayer-funded disaster relief for flood victims and the increasing amount of damage caused by floods. The NFIP makes Federally backed flood insurance available in communities that agree to adopt and enforce floodplain management ordinances to reduce future flood damage. The NFIP is self-supporting for the average historical loss year. This means that unless there is a widespread disaster, operating expenses and flood insurance claims are financed through premiums collected.

According to a RAND Corporation study conducted for the Federal Emergency Management Agency (FEMA), nationwide about 49 percent of single-family homes in special flood hazard areas (SFHAs) are covered by flood insurance from the National Flood Insurance Program. In the South and West the percentage is higher, about 60 percent. However, outside of the high risk areas there is a steep drop-off in coverage. Only about one percent of homeowners purchase flood insurance in these low risk areas.

My district in Harris County, Texas, had only a 25 percent market penetration rate, which means that only 1 in 4 households was covered with a flood insurance plan. Given the extent of damage and flooding from circumstances as extreme as Hurricanes Katrina and Rita, and as common as our recent storms last week, this rate is unsustainable for my constituents, let alone for their local governments.

It is important to remember that often, residents won't receive Federal aid for flooding or other natural disaster damage if the area is not declared a disaster area. On average, households can receive $700 from organizations such as the Red Cross--but this amount clearly won't cover the full cost of the damage.

Nationwide, flash flooding is the leading cause of weather-related deaths in the U.S.--approximately 200 deaths per year.

Implicit in the reforms established in this bill, however, is the need for an honest and transparent government process. My amendment contributes language to the GAO study analyzing the pre-FIRM (Flood Insurance Reform and Modernization Act) properties and mandatory purchase requirements for natural 100-year floodplain and non-Federally related loans.

Specifically, my amendment requires the GAO to determine the extent to which eligibility standards for pre-FIRM properties were inconsistent and resulted in disparities in coverage among such properties and their owners. The intent is to discover whether or not the application of eligibility standards remained consistent, and if not, whether some homeowners who should have been eligible for flood coverage did not receive it. With this amendment, I hope the GAO will be able to answer the following question: Has there ever been the case where someone should have gotten insurance, but didn't?

I urge my colleagues to support this amendment and support effectively reforming the National Flood Insurance Program.

I yield to the gentleman from Ohio.

I yield to the gentleman from Massachusetts.

Mr. Chairman, I thank the distinguished gentlemen, both, and in fact, Mr. Chairman, with great appreciation for both of you for this deference to me today.

Mr. Chairman, I yield back my time.

Mr. Chairman, I yield myself such time as I may consume.

I rise today in support of H.R. 4973, the Flood Insurance Reform and Modernization Act of 2006, or the FIRM Act. This legislation will significantly reform the National Flood Insurance Program and ensure its continued viability. After all the rain we have seen in our Nation's capital these past few days, now is an especially good time to take a close look at this program that millions of Americans count on to protect the investment they have made in their homes from flood damages.

The Financial Services Committee has a history of reforming the NFIP and with conducting oversight over the program. Spearheaded by the efforts of our former colleague, Representative Doug Bereuter of Nebraska, this committee took significant steps toward reform with passage of the Bunning-Bereuter-Blumenauer Act in 2004. That bill helped ensure that those people whose homes flooded on a frequent basis will not continue to soak the American taxpayers by filing flood loss claims time and time again.

Under the leadership of my friend Bob Ney, chairman of the Subcommittee on Housing and Community Opportunity, the committee continued to oversee the NFIP last year with a field hearing in his district and with hearings on the status of flood map modernization and the program in general. These hearings exposed a number of deficiencies in the NFIP, including the fact that FEMA was not moving quickly enough to reform the program and that the Nation's flood maps are often outdated and inaccurate.

Then came Hurricanes Katrina, Wilma and Rita. These storms placed an unprecedented strain on the NFIP that continues to this day. We had to raise the borrowing authority of the flood program first to $3.5 billion, then to $18.5 billion, then to $20.8 billion. FEMA tells us that it is still not enough to cover all the claims from last year. When all is said and done, the NFIP will need $25 billion to pay all of those claims, and that does not take into account any storms we have before hurricane season ends this year.

We have an obligation to these estimated 225,000 policyholders who have already filed a claim resulting from the events of 2005. These homeowners who have a binding contract with the NFIP to cover flood events could initiate legal action against FEMA and the U.S. Government if the flood insurance program does not make good on this contract.

At the same time, we also have an obligation to reform and modernize the NFIP so that homeowners will continue to have access to flood insurance. According to recent estimates, more than half the U.S. population lives within 50 miles of the sea. While senseless coastal development should not be subsidized or encouraged, these homeowners who play by the rules and live in homes that take proper flood mitigation steps should also not be penalized.

The FIRM Act is a bipartisan bill. Chairman Baker and I have worked closely with Ranking Member Frank to put together numerous reforms that will serve to increase FEMA's accountability and address the weaknesses exposed by last year's flooding.

In an effort to make the NFIP more actuarially sound, the FIRM Act phases out the subsidized rates currently enjoyed by the owners of hundreds of thousands of vacation homes and second homes. If you can afford one of those homes, you can afford to pay your freight. In addition, the bill introduces new lines of coverage at actuarial prices and increases the program's coverage limits to reflect inflation. These are common-sense reforms that, again, will be actuarially priced.

The FIRM Act requires FEMA to administer the program more responsibly. Flood maps will be improved and updated, and FEMA will have to certify to Congress that they have done so. The NFIP's borrowing authority will be temporarily increased to ensure that all outstanding claims will be paid.

The FIRM Act increases the amount that FEMA can raise policy rates in any given year from 10 percent to 15 percent; and for those lending institutions that drop the ball on enforcing mandatory flood insurance purchase requirements, fines will be tripled from where they are now.

I remain committed to the reform of the National Flood Insurance Program that we in the Financial Services Committee started with passage of the Bunning-Bereuter-Blumenauer Act in 2004. H.R. 4973 is the logical next step on the road to fiscal soundness for NFIP.

I commend Mr. Baker for his work and strongly urge a vote for final passage.

Mr. Chairman, I retain the balance of my time.

Mr. Chairman, I recognize the gentleman from Ohio (Mr. Ney) and yield him 2 minutes.

Mr. Chairman, I yield 3 minutes to the gentleman from Louisiana (Mr. Baker).

Mr. Chairman, I yield 3\1/2\ minutes to the gentlewoman from Pennsylvania (Ms. Hart).

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield 2 minutes to the gentleman from Florida (Mr. Shaw).

I thank the gentleman for yielding.

I understand that this is an issue in many States around the country but especially in those States hit by hurricanes in the last 2 years. I would welcome the opportunity to explore this issue further with the gentleman and my good friend from Florida, as well as the gentlewoman from Florida.

Mr. Chairman, I yield 4 minutes to the gentleman from California (Mr. Gary G. Miller).

Mr. Chairman, we have no further speakers. I yield back the balance of my time.

Mr. Chairman, I have an amendment at the desk made in order under the rule.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, I rise in support of the manager's amendment to H.R. 4973. In addition to making technical changes necessary for the bill, the manager's amendment will clarify the drafter's intent in a handful of areas.

This amendment establishes that the phasing in of actuarial rates for second homes and nonresidential properties will begin once FEMA has certified completion of their map modernization efforts. This is necessary to ensure that subsidies are eliminated fairly and without inaccurate information about which homeowners should be purchasing flood insurance in the first place.

In addition, the amendment provides that the $1 million cap on penalties for nonenforcement of NFIP requirements not apply to regulated entities that have been assessed a penalty of $1 million in any 3 of the past 5 calendar years. This will help ensure that bad actors not get away with ignoring the need for adequate enforcement or mandatory flood insurance purchase requirements.

This amendment more clearly defines FEMA participation in State disaster claims mediation programs and ensures the confidentiality of documents and conversations during the mediation process.

In addition, it clarifies that mediation participation does not interfere with the exclusive Federal jurisdiction enjoyed by the Federal courts over the NFIP and provides that FEMA will not incur any additional fees as a result of mediation participation.

The manager's amendment also more clearly sets out the timeline for FEMA's inclusion of certain features on updated floodplain maps and clarifies the FEMA Director's authority regarding the ability to issue interim postdisaster flood elevation building requirements.

This amendment is a bipartisan effort that makes this bill better and more technically sound. I urge my colleagues to support it.

Mr. Chairman, I reserve the balance of my time.

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

Mr. Chairman, will the gentleman yield?

Mr. Chairman, I appreciate the gentleman yielding and also say to my friend from Mississippi, congratulations on a well-thought- out amendment. I know the gentleman has had personal issues with this, as well as our good friend, former House Member Senator Lott; and we have had a number of discussions about the frustration that you and many of your constituents feel.

We think that it is appropriate that the IG conduct that investigation and report back within 6 months, and therefore we are prepared to accept the amendment.

Mr. Chairman, we are pleased to accept the amendment. I congratulate the gentleman on his foresight. We are prepared to vote in favor of the amendment.

Mr. Chairman, will the gentlewoman yield?

Mr. Chairman, the Chair is prepared to accept the amendment. I want to thank the gentlewoman for her foresight and also for merging this new technology with the ability of FEMA to make better and more accurate mapping.

Mr. Chairman, we have reviewed the amendment and are prepared to accept it.

Mr. Chairman, I move that the Committee do now rise.