Legislation that allows victims of the Jan. 7 fire storms to receive up to a year of mortgage relief was signed by Gov. Gavin Newsom as an urgency measure that takes effect immediately.
Assembly Bill 238 enables borrowers to put a stop to their mortgage payments for up to 12 months with no late fees or penalties, by attesting without documentation that the fires caused a financial hardship.
The relief is extended in 90-day increments that can be extended at the property owner’s request. The law prohibits mortgage servicers from initiating a foreclosure or executing a foreclosure judgment or sale.
“Homeowners rebuilding after a disaster need all the support they can get, including grace in light of this incredible hardship,” Newsom said in a statement after signing the legislation this week. “I look forward to additional conversations with lenders in the coming months about how we can continue to support survivors together.”
The bill, co-sponsored by Assemblymember John Harabedian (D-Pasadena) and Assemblymember Jacqui Irwin (D-Thousand Oaks), whose districts include the Eaton and Palisades fire zones, respectively, provides more generous relief than a voluntary forbearance program Newsom and Harabedian put together in January.
That program provides for 90 days of relief from payments, without accruing late fees or damage to credit scores. It also offers protections from new foreclosure of eviction actions for at least 60 days. More than 400 financial institutions signed on to the program.
Any relief provided under that program, operated by the Department of Financial Protection and Innovation, would be credited toward the 12-month extension limit established by AB 238.
“For months since the fires, survivors have been forced to make two housing payments: one for their temporary rental accommodations and another mortgage payment for a house that either doesn’t exist anymore or is uninhabitable due to smoke and ash damage. AB 238 will ease the financial burden that too many families are facing,” Harabedian said in a statement.
The bill, introduced in January in the Assembly, was amended to make it more consumer friendly.
Among the changes in the final text of the bill is a prohibition on mortgage services from dinging the credit of borrowers who make use of the program. It also gives borrowers the flexibility to repay the relief by banning lump sum repayment after the forbearance period ends, as long as a borrower was current on payments when it started.
While it’s been more than eight months since the fires in Pacific Palisades, Altadena and nearby communities that damaged or destroyed more than 16,000 structures, reconstruction is just getting underway and many claims submitted by policyholders to their insurers remain open.
Claims for smoke damage have proved to be especially problematic, prompting multiple lawsuits against insurers and the California FAIR Plan Assn., the state’s home insurer of last resort.
The Department of Angels, a group formed after the fires to aid in recovery, conducted a survey of Altadena, Pacific Palisades, Malibu, Pasadena and Sierra Madre fire victims in June that found only 1 in 4 had insurance claims fully approved.
Joy Chen, executive director of the Eaton Fire Survivors Network community group, said the legislation will help thousands of homeowners who are struggling to fix or rebuild their homes.
“One year of mortgage relief now will help people get stabilized, especially because many are having trouble getting access to their temporary housing payments due from their insurance,” she said. “There are so many difficulties. It’s like a full-time job to be a survivor. People are really feeling despair.”
AB 238 fared better in the Democratic-controlled Legislature than similar mortgage-relief legislation did in Congress that was proposed by legislators Sen. Adam Schiff (D-Calif.) and Rep. Judy Chu (D-Monterey Park).
However, Chu has had more success with her bipartisan Filing Relief For Natural Disasters Act, which was signed into law by President Trump in July.
The act authorizes the Treasury Department and Internal Revenue Service to extend federal tax filing deadlines for individuals living in state-declared disaster zones, even before a federal disaster declaration is issued. It also ensures that survivors benefit from at least 120 days of filing relief, double the previous minimum extension of 60 days.
AB 238 was one of just several wildfire-related bills sitting on the governor’s desk awaiting his signature.
One bill, Senate Bill 495, would require insurance companies to pay 60% of fire victims’ personal property coverage after a declared disaster up to $350,000 — without forcing them to provide an itemized list of losses. Currently, insurers must advance an amount equivalent to 30% of the policy’s dwelling limit, up to $250,000.
Others bills assist homeowners who take steps to reduce the fire risks on their property, and there is a package that seeks to reform and strengthen the FAIR Plan, including by requiring two legislators serve on its governing board.
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