The Bill’s official name is “An Act Relative to Flood Insurance” On Wednesday, July 23, 2014, Governor Deval Patrick signed “An Act Relative to Flood Insurance” into law. He then tweeted a picture of himself signing the Bill which you can view here:
The Law, originally filed by Attorney General Martha Coakley and House Speaker Robert DeLeo, was created to prevent creditors from requiring that Massachusetts homeowners purchase flood insurance in amounts that exceed the outstanding balances of their mortgages or a home equity line of credit.
The newly enacted law explicitly prohibits a creditor from requiring in a mortgage, note or otherwise, that a purchaser or owner of residential property purchase or pay for flood insurance on the property:
1. At a coverage amount that exceeds the outstanding mortgage loan from the creditor;
2. That requires the purchaser or owner to insure the contents of the property with the mortgage; or
3. That requires the purchaser or owner to maintain a deductible of less than $5,000.00.
The law signed by the Governor also mandates a specific notice anytime a creditor requires in a mortgage note or otherwise the owner or purchaser to purchase or pay for flood insurance on the property. This notice must have in clear and conspicuous print the following statement:
Please note that the flood insurance we are requiring you to purchase will only protect your creditor/lender’s interest in your property. It may not be sufficient to pay for many needed repairs after a flood and may not compensate you for your losses in the property due to the flood. If you wish to protect your home or investment, you may wish to purchase more flood insurance than the amount we are requiring you to buy.
The Massachusetts House of Representatives unanimously passed the Bill in March 2014, followed shortly by the Massachusetts Senate’s passage of the Bill in June 2014. The new Law will now take effect 120 days after the Governor’s signing the bill into law.
Attorney General Martha Coakley issued a press release upon the signing of her bill into law stating:
The proposed federal flood insurance changes were inherently unfair to thousands of Massachusetts families. This new law, combined with recent changes to the National Flood Insurance program, will offer greater protection to families who could face unsustainable rate increases through no fault of their own. I extend my thanks to Speaker DeLeo for his leadership and partnership on this important bill, to members of the House and Senate for their support, and to the Governor for signing this into law.
This state legislation complements the bi-partisan “Homeowner Flood Insurance Affordability Act of 2014” that President Obama signed into law on March 21, 2014. This Federal legislation deferred some flood insurance rate increases and limited other rate increases to 18 percent per year as well as calling for a limit of flood premium to one percent of the total coverage of each policy.
