A House hearing on what Congress should do to reducethe impact of flood insurance rate increases was like watching twoworlds collide.

A representative of a Louisiana-based citizens group testifiedthat allowing the rate hikes to go into effect as mandated, "wouldbe economically unwise and morally unjust."

And, the politically powerful National Association of Realtorssaid "implementation of the law has proven complicated anddifficult to implement."

"Only the first round of rate changes have taken effect andalready, property owners and Realtors across the country arereporting dramatic increases well beyond what was imagined andcertainly beyond congressional intent," said Maurice Veissi, NAR2012 president.

Veissi voiced support for legislation pending in Congress thatwould delay the increases, and, in the interim, called on theFederal Emergency Management Agency (FEMA), which administers theNational Flood Insurance Program, to convene a summit to develop alonger-term affordability solution.

On the other hand, Rep. Randy Neugebauer, R-Texas, chairman ofthe Subcommittee on Housing and Insurance of the House FinancialServices Committee, said there "has been a lot ofmisunderstanding surrounding the implementation" of the law, and"homeowners are confused and, in some cases, scared aboutpotential rate increases."

For instance, Neugebauer said the committeehas looked intocomplaints about exorbitant flood ratesfor policyholders who have been re-mapped, where premiumsare believed to increase because of Sec. 207 of the law,the Biggert-Waters Act.

He said FEMA has not made final determinationson these "Sec. 207 properties–and in many cases maps are still twoyears away from being approved by local communitiesand finalized by FEMA."

Moreover, Neugebauer said, after more than a decade inCongress, "if I have learned anything, it is thatthe federal government does a terriblejob of underwriting and pricing risk. And that has veryreal consequences for taxpayers who end up footing the bill for thegovernment's failures."

Craig Fugate, FEMA administrator, testified that, "By statuteand design, the NFIP was not actuarially sound."

He said the NFIP collects more than $3.5 billion inpremiums annually, but estimates that an additional $1.5 billion isneeded from subsidized homeowners to make the program solvent. Hesaid that because of subsidies and such catastrophic floodingevents as Hurricane Katrina and Superstorm Sandy, the program nowowes the federal government $24 billion.

Fugate said the NFIP cannot withstand another Katrinaor Sandy event without additional borrowing. He said it has only$6.4 billion left to borrow before asking for more borrowingauthority.

"Even with the increases in premiums, you are not going to seethe NFIP debt retired anytime soon," Fugate said.

But Michael Hecht, president and CEO of Greater New Orleans,Inc. (GNO) painted a different picture. Hecht said he wastestifying not only on behalf of GNO, but also for the Coalitionfor Sustainable Flood Insurance, which now represents nearly 200business and trade associations and local governments in 27 statesacross America.

"We are dealing with a problem of profound unintendedconsequences," Hecht said, adding that a "three-wayconfluence of the B-W Act, incomplete FEMA maps thatartificially inflate risk, and questionable actuarialcalculations has led to premium increases of up to 3,000percent and more, including massive rate increases forpolicyholders who have built as the government told them and haveno history of flooding."

"These clearly unaffordable premium increases are not limited toproperties with severe repetitive loss and wealthy beachfronthomes: primary residences of all income levels that have neverflooded are being negatively impacted," he added.