Posted Sep. 11, 2015 at 1:34 AM
Updated Sep 11, 2015 at 1:37 AM
QUINCY – Starting today , when Massachusetts homeowners go to renew their flood insurance policies, they will have the option to cover only the outstanding loan balance on a given property.
In 2014, then-Gov. Deval Patrick signed into law a bill that bans lenders from requiring borrowers to carry flood insurance for more than their remaining mortgages.
A homeowner, for example, who owes $50,000 on a $250,000 home would only need $50,000 worth of coverage. It would also ban creditors from requiring policies with deductibles of less than $5,000 or that cover home contents.
Draft regulations by the state Division of Banks released late last year offered the relief only to mortgage holders whose loan applications were received after Nov. 20, 2014.
But in a letter to Quincy City Council President Joseph Finn dated Aug. 19, David Cotney, the state commissioner of banks, said the regulations have been modified.
For mortgages originated prior to Nov. 20, 2014, creditors will have to comply with the law, Chapter 177, beginning the first time the flood insurance policy for the property renews after Sept. 11. The law also applies to home equity loans and lines of credit as well.
At their meeting Tuesday, Quincy city councilors praised the law, calling it a victory for consumers.
The bill was introduced by House Speaker Robert DeLeo, D-Winthrop, and state Sen. Robert Hedlund, R-Weymouth. It was drafted by then-Attorney General Martha Coakley.
Legislators drafted the bill after homeowners started feeling the effects of the Biggert-Waters Flood Insurance Reform Act of 2012, which eliminated flood insurance subsidies for homes built before flood maps, causing premiums to soar. A relief act later repealed some of the most devastating provisions of Biggert-Waters.
At the same time, new flood maps released by the Federal Emergency Management Agency expand flood plains and raise water elevations, forcing thousands of property owners to start buying pricey coverage.
Jessica Trufant may be reached at [email protected].