California bills would pause mortgage payments in disasters

Three wildfire-relief bills, including one that would let homeowners pause mortgage payments after a disaster declaration, cleared their respective California committees this month and are headed to formal votes. 

State Assemblymember John Harabedian, D-Pasadena, whose district includes some of the neighborhoods hardest hit by the early-2025 Los Angeles wildfires, led proposals for all three bills, aimed at homeowner protections against threat of foreclosure or loss of insurance. 

The new emergency mortgage relief proposal

AB 1842, titled the California Mortgage Relief Act, would establish a legal framework and reporting rules for the first time, with the legislation allowing homeowners to pause monthly loan payments in the event of a state emergency declaration after future natural disasters or catastrophic events.  

If passed, servicers will be mandated to offer an initial 180-day forbearance period upon emergency declaration, with additional 90-day extensions allowed on borrower request, for up to 12 months. Assessment of late fees or default interest rates would be prohibited during the forbearance period per terms of the law, as well as any lump-sum repayment obligation following the end of the full term. 

"California is facing more frequent and severe natural disasters, and families should not have to worry about mortgage payments on homes they cannot live in," Harabedian said when he introduced the bill earlier this year. 

"By extending protections and creating a statewide safety net, we are standing with families when they need it most, helping them heal, rebuild and stay rooted in their communities."

During a state of emergency and 90 days thereafter, servicers will also be required to report to the state's department of financial protection and innovation monthly reports detailing the number of requests received and resulting approvals or denials. 

California's leading mortgage advocacy group raises warnings

While supporting the bill's objective to assist homeowners, the California Mortgage Bankers Association raised warnings that the bill could prove detrimental to those it is intended to help. The trade group pointed out AB 1842 would introduce new rules that go beyond current laws and guidelines federal regulators and investors already have in place. 

"This bill goes further than current law by applying these requirements to any state-declared emergency, even if the federal government has not issued a state of emergency," said CMBA CEO Paul Gigliotti in a video detailing legislative updates on the association's YouTube channel.

The bill runs the risk of coming into conflict with other guidelines and would necessitate alignment of multiple sets of requirements during emergency conditions, which could delay assistance rollout, he continued.

"At the very moment when clarity and speed are most important, conflicting requirements can create confusion, and that is the last thing homeowners need during a crisis."  

Also passing in April was AB 1847, which Harabedian introduced alongside the relief act. The law would extend the forbearance period for victims of the January 2025 wildfires for an additional two years. Homeowners in the affected communities were originally granted one year of forbearance upon request. 

The proposal also pushes out the deadline to request forbearance relief to Jan. 7, 2029, the four-year anniversary of the catastrophe. 

Both bills passed through the California Assembly's banking and finance committee on April 21. 

"These bills are about more than mortgages — they are about giving families hope, security, and a chance to rebuild their lives after unimaginable loss," Harabedian continued. 

While California originally passed mortgage relief laws requiring 12 months of forbearance and outlawed foreclosures immediately following the wildfires, homeowners reported instances of servicers denying or delaying relief. The reports drove Harabedian's efforts to put requirements into law, he said. 

Insurance law would extend cancellation moratoriums

Separately, Harabedian also saw another of his proposals that would require one-year extensions of existing insurance coverage on wildfire-stricken properties move from committee to a floor vote. 

AB 2038  would prevent home-insurance providers from canceling coverage on clients with complete property losses in the Los Angeles wildfires for a total of three years, adding an additional 12 months to the existing prohibition. 

Similarly, insurers will see a two-year moratorium on cancellation of coverage for clients with homes located in ZIP codes within the wildfire perimeters.  

Co-sponsored by Assemblymember Rick Zbur, D-Los Angeles, the bill cleared the assembly committee on insurance in mid April. Current rules do not adequately take into account the difficulty of recovery, according to Harabedian. 

"Navigating recovery after a wildfire has not been a straight path," he said following the committee vote. "Granting more time to homeowners so they can focus on recovery without the burden of insurance coverage remains crucial to reducing displacement and providing stability to our communities."

All three bills still must pass a California Assembly vote and negotiations, followed by a similar Senate process before being signed into law.