A new law offering significant mortgage relief to victims of recent devastating wildfires has been enacted, providing crucial support to those grappling with the aftermath of the blazes. Assembly Bill 238, now in effect, allows eligible borrowers to suspend their mortgage payments for up to a year, without incurring late fees or penalties. This relief is granted in 90-day increments, extendable at the homeowner’s request, and prevents mortgage servicers from initiating foreclosure proceedings during this period.
This legislation, a collaborative effort spearheaded by Assemblymember John Harabedian and Assemblymember Jacqui Irwin, offers more extensive aid than a previously established voluntary forbearance program. That earlier program, which involved commitments from numerous financial institutions, offered 90 days of payment relief, along with protection from new foreclosure or eviction actions for at least 60 days. Any relief received under the initial program will now be credited toward the 12-month extension available under AB 238.
The rationale behind this extended relief is clear: many homeowners face the financial burden of maintaining temporary housing while still paying a mortgage on a damaged or destroyed property. The new law aims to alleviate this pressure, allowing families to focus on rebuilding their lives. The bill, which was amended to be more consumer-friendly, also protects borrowers’ credit scores and provides flexibility in repayment, prohibiting lump-sum payments at the end of the forbearance period if the borrower was current on payments when the period began.
The wildfires, which occurred months ago and impacted thousands of structures, have left a lasting impact. While reconstruction efforts are underway, many insurance claims remain unresolved, particularly those related to smoke damage. This has led to legal challenges against insurers and the California FAIR Plan, the state’s insurer of last resort. A survey revealed that a significant proportion of fire victims have yet to have their insurance claims fully approved.
Community groups, like the Eaton Fire Survivors Network, have emphasized the importance of this legislation in helping homeowners stabilize their finances, especially given the difficulties in accessing temporary housing payments from insurance companies. This measure is seen as a critical step in providing relief and helping individuals navigate the complex challenges of rebuilding after a disaster.
The success of AB 238 in the state legislature stands in contrast to similar mortgage-relief efforts that have faced challenges at the federal level. However, other forms of federal relief have been successful. For instance, legislation like the Filing Relief For Natural Disasters Act, which was signed into law, has provided extended federal tax filing deadlines for individuals affected by declared disasters.
Beyond mortgage relief, other wildfire-related bills are also advancing. One bill requires insurance companies to pay a larger percentage of fire victims’ personal property coverage immediately after a declared disaster, while others address wildfire risk reduction and reforms to the FAIR Plan, including the addition of legislative members to its governing board. These measures collectively aim to provide comprehensive support to those impacted by the wildfires, ensuring financial stability and facilitating the long road to recovery.