The House passed a bill that would extend the National Flood Insurance Program until July 31.

The bill, approved by voice vote also includes a provisiondemanded by the Senate that will phase out subsidies on secondhomes over four years, effective July 1.

The bill is H.R. 5740.

Based on commitments by the Senate leadership, the House actionraises the “likelihood” that legislation reauthorizing the programuntil Sept. 30, 2016 could be passed by Congress before it leavesfor its summer recess Aug. 3, according to an industrylobbyist.

That would be based on the fact that Sen. Harry Reid, D-Nev.,Senate Majority Leader, has indicated that he hopes the full Senatewill act on S. 1940, its version of long-term reauthorization ofthe program within two weeks of returning from its Memorial Dayrecess June 4.

That would set the stage for reconciling the final version of S.1940 with H.R. 1309, House version of the legislation passed by theHouse last July.

After the vote, Rep. Judy Biggert, R-Ill., chief sponsor of theHouse version of the bill, said, “The good news here is that theSenate has expressed a commitment to take up a long-term floodreform bill in June. I welcome that development and lookforward to working with the Senate to ensure that we send a finallong-term reform bill to the President this summer.”

If the House had not acted by Thursday, the currentreauthorization of the NFIP would have run out May 31.

Suspension of the program would have meant that floodpolicyholders could not make policy changes, nor could newhomeowners apply for flood insurance, according to officials atState Farm and the National Association of Mutual InsuranceCompanies.

The first market reaction to the House vote will be an increasein a 25 percent increase in flood insurance rates for any propertythat is not a primary residence.

This provision was demanded by Sen. Tom Coburn, R-Okla., as hisprice for allowing the latest extension to be approved. He alsodemanded as his price for allowing H.R. 5740 to be pushed throughthe Senate under unanimous consent rules that the current extensionfor the current program be the last.

“We're pleased the House acted to avoid a lapse while alsopassing these meaningful reforms,” said Matt Gannon, assistant vicepresident for federal affairs for the National Association ofMutual Insurance Companies

“These subsidy cuts are just part of the reforms on which thereis broad consensus, but more work still needs to be done,” hesaid.

“Congress can be proud of this responsible debt-reductionmeasure, but they can't stop now,” he said.

“This week's Atlantic storms remind the country of the need fora stronger NFIP. We urge the Senate to keep up the momentumby voting on their bill as soon as they convene next week,” Gannonsaid.

According to Ray Lehmann, director of public affairs at the RStreet Institute, said that the definition as contained in the billpassed last Thursday in the Senate includes all non-primaryresidences, not just vacation homes.

The first set of 25% increases would come on July 1, and thenthey would — presuming the five-year reauthorization is passed– be scheduled annually until the property's rates reach fullactuarial rates, Lehmann said.

The Congressional Budget Office projects that end subsidies onnon-primary residences will yield revenues of $2.4 billion over 10years. The NFIP is currently approximately $18 billion in debt.

Lehmann said that the Government Accountability Office estimatedin 2004 that 30% of NFIP policyholders with subsidizedpremiums are second homes or vacation homes. Given that there are5.6 million NFIP policies, about 20% of them receive subsidizedrates, it would be about 335,000 policies that would be affected bythe change, Lehmann said.

The Federal Emergency Management Agency, which runs the NFIP,said it does not comment on pending legislation.

Arthur D. Postal is Washington bureau chief forNational Underwriter, a sister publication to Credit UnionTimes.