Victims of last year’s wildfires in Los Angeles County who were unable to get mortgage relief under a state law enacted last year would get another chance with a stronger bill introduced Wednesday.
The legislation, AB 1847, by Assemblymember John Harabedian (D-Pasadena), would triple to 36 months the 12 months of mortgage relief offered by last year’s AB 238, while allowing borrowers to repay the money through a deferral that extends the mortgage.
Also authored by Harabedian, AB 238 prohibited mortgage lenders and servicers from requiring borrowers to pay back any forbearance in a lump sum, but it otherwise did not specify repayment terms. It also banned late fees, foreclosures and negative reports to credit bureaus.
Borrowers told The Times that they had difficulty getting any relief and when they did, they were told if they didn’t want to pay it back in a lump sum, they would have to agree to a loan modification that could raise their interest rate.
Like AB 238, the relief can only be obtained if allowed by the underlying mortgage contract.
However, Harabedian said that most of the contracts and guidelines of Fannie Mae and Freddie Mac — the government-sponsored organizations that hold or guarantee the majority of U.S. mortgages — do not bar loan deferrals.
“I think some people were being offered forbearance that, frankly, didn’t comply with 238 when it should have,” he said. “They weren’t given any sort of election or flexibility on how they would repay so we’re trying to perfect it now.”
Harabedian said most of the problems borrowers are facing appear to be due to companies that service mortgages on behalf of lenders, while large institutions such as Bank of America have been more generous.
The Charlotte, N.C., financial institution in December started offering 36 months of mortgage relief to its borrowers without a change to the interest rate.
Another key AB 238 amendment is the extension of relief from 12 to 36 months, which borrowers seek in 90-day increments. The deadline for applying for relief would be extended to Jan. 7, 2029.
Harabedian said 36-months of relief are necessary as it will take many homeowners years to fix and rebuild their homes after the fires in Altadena, Pacific Palisades and nearby communities, which killed at least 31 people and damaged or destroyed more than 18,000 homes.
“This extension tries to align with the full rebuild process that survivors are going to endure, and make sure that from the start of it till the end of it, they’re not under financial distress that would cause them to abandon their communities,” he said.
Len Kendall, who lost his home in Pacific Palisades, said that while he welcomed the legislation, he is still uncertain how it might affect him, including his terms of repayment.
“There’s going to have to be follow up to make sure these these servicers and lenders actually abide by the laws, because there’s no one really holding them accountable at the moment,” he said.
Last month, Gov. Gavin Newsom said in a press release that the Department of Financial Protection and Innovation has received 233 mortgage forbearance complaints, with 92% resolved in the consumer’s favor.
However, Kendall said that the agency closed his complaint even though his mortgage servicer had requested a lump sum and his repayment plan remains up in the air.
The agency told him in a letter reviewed by The Times that it “cannot intervene on behalf of individual consumers in any particular case” and that it “brings consumer protection actions when we find patterns of deception, misrepresentation or unfair business practices of statewide interest.”
A spokesperson for the agency said it worked with Kendall to ensure he received “appropriate” forbearance relief and considers the matter resolved.
He added the department is monitoring compliance with AB 238 but so far has not announced any enforcement actions against lenders or servicers.
Harabedian introduced a second bill Wednesday that would provide for mortgage forbearance statewide for homeowners whose residences are uninhabitable after a state of emergency declared by the governor or federal government.
The California Emergency Mortgage Relief Act, AB 1842, requires mortgage servicers to file a monthly report with the DFPI about the number of forbearance requests they receive during a declared emergency and how many were approved and denied, including the reason for denial.
The bill also allows a borrower to bring a civil action against a mortgage servicer for violations of the law.
The AB 238 amendments, if signed into law, would take effect immediately.
Harabedian’s office worked with the California Bankers Assn. and the California Mortgage Bankers Assn. in developing AB 238. The lawmaker said he not sure if they will support the extension of mortgage relief.
“We look forward to reviewing it with our members and working constructively with stakeholders as we have consistently done. The banking industry proactively provided relief to wildfire victims, and this effort pre-dated legislative action,” said Yvette Ernst, spokesperson for the California Bankers Assn.
The California Mortgage Bankers Assn. said it also was reviewing the legislation.
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