California Bill—if passed by California state legislature and if signed into law by Governor Newsom–Would Provide a Year of Mortgage Relief to Fire Victims
[as reported in the Credit & Collection e-newsletter of 1/29/25]
The proposed legislation which has been introduced in the California Legislature, after the Palisades and Eaton fires of January 2025, if passed by the California Legislature, and signed into law by the Governor, would block foreclosures and allow homeowners who’ve suffered financially due to the L.A. fires to freeze payments without penalty. Several major lenders have already reached agreement with Gov. Gavin Newsom to provide voluntary relief.
If it becomes CA law, this CA state legislation that would make it easier for victims of the Los Angeles County fires to receive one year of mortgage relief will move ahead, despite voluntary agreements Gov. Gavin Newsom reached with hundreds of lenders.
CA Assembly Bill 238 would allow borrowers to put a stop to their mortgage payments for up to 180 days with no fees, penalties or interest, simply by attesting — without documentation — that the fires caused a financial hardship. The relief could be extended another 180 days at the property owner’s request.
The bill also would prohibit a mortgage servicer from initiating a foreclosure, and moving for or executing a foreclosure judgment or sale.
“This should be the industry standard across the board and I look forward to continuing to work with stakeholders to make this a reality for all those who were impacted by the wildfires,” said Assemblymember and co-sponsor, Democrat John Harabedian, whose district includes hard-hit Altadena.
The bill, co-sponsored by Democratic Assemblymember Jacqui Irwin, whose district includes Pacific Palisades, was introduced prior to Newsom’s agreements with several big banks and hundreds of state-chartered lenders to provide mortgage relief — but not on as generous terms.
Those agreements provided for streamlined processes to seek 90-days of relief from payments, without accruing late fees or being dinged by credit bureaus, and protections from new foreclosure of eviction actions for at least 60 days. It is being offered to borrowers whose properties were damaged or destroyed.
Federally chartered Wells Fargo, Bank of America, JP Morgan, Citibank and U.S. Bank reached an agreement with Newsom to provide the voluntary relief on Jan. 18, following by 270 state-chartered banks last week.
Among the state banks participating in the program are Banc of California, Hanmi Bank and PennyMac Loan Services.
City National Bank, a subsidiary of Royal Bank of Canada and the largest bank headquartered in the county, added its name this week to the roster of lenders providing mortgage relief.
The Assembly bill would typically be referred to a committee for a hearing in the spring, but Tom Steel, Harabedian’s chief of staff, said the lawmaker will be seeking other options to expedite the legislation.
The bill has nine principal co-authors, nearly all representing districts including Los Angeles County.