A dramatic increase in flood insurance rates under a new federal law and a redrawing of flood lines by the Federal Emergency Management Agency could harm property values and lead to a new spate of foreclosures just as Massachusetts is beginning to recover from the Great Recession, several speakers told a state legislative panel yesterday.
"It is impossible to overstate the impact this could have," state Rep. James M. Cantwell (D-Marshfield) told the Joint Committee on Financial Services, referring to FEMA's action and the Biggert-Waters Flood Insurance Reform Act of 2012, which will do away with subsidies for some properties and end the grandfathering of those that used old flood-risk data.
"This affects buyers and sellers," said Kimberly Moccia, a mortgage consultant at Radius Financial Group. "Sellers are having to make reductions in prices ... My concern is we're going to see an influx of foreclosures."
Scituate Selectman Martin O'Toole said he feared that many businesses will move elsewhere.
"Our tax base would be decimated," O'Toole said.
Cantwell urged the committee to support House Bill 865, which would require the state insurance commissioner to investigate every two years how rates are set by the National Flood Insurance program and make suggestions to ensure they are not excessive.
But the committee's House chairman, Rep. Michael Costello (D-Newburyport), said that could be more easily achieved if Gov. Deval Patrick directed the commissioner to do so.
The governor's office had no immediate comment.
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