In a week where the Office of the Comptroller of the Currency (OCC) has a new Acting Director, Rodney Hood, who will focus on a “balanced framework – one that fosters innovation, expands financial inclusion, and ensures all Americans have fair access to the financial services they need to thrive,” and the Consumer Financial Protection Bureau (CFPB) has a new Director, Russell Vought, who has halted all CFPB activity and will not take funding, financial institutions serving Southern California customers also should keep a keen eye on Sacramento.
Assembly Member John Harabedian has introduced mortgage forbearance legislation, which if passed will enable wildfire disaster impacted borrowers experiencing financial hardship to request a 180-day forbearance, with the option for an additional 180-day period. During the forbearance period, the mortgage servicer shall not initiate or move forward with any judicial or nonjudicial foreclosure. Mortgage servicers shall communicate with impacted borrowers to confirm that missed mortgage payments are required to be repaid, but can be paid over time. The legislation prohibits the charging of any fees or penalties during the period. The Mortgage Deferment Act, if passed, will amend the provisions of Civil Code sections 3273.20 through 3273.24.
Governor Newsom announced February 11, 2025, that he is co-sponsoring legislation to “ensure homeowners, not lenders, benefit from the interest earned on insurance payouts, particularly those impacted by California’s most destructive wildfires.” In a section entitled “Why this matters,” the press release asserts: “No new burdens on lenders: Simply aligns insurance payout escrow rules with existing California escrow interest law.”
The Governor is quoted in the press release: “Homeowners rebuilding after a disaster need all the support they can get, including the interest earned on their insurance funds. This is a commonsense solution that ensures that they receive every resource available to help them recover and rebuild.” As of the time of drafting this article the text of the legislation was not available. Assembly Member Harabedian who reportedly has authorized the legislation also issued a press release, which indicates “the Bill will be heard in the Assembly policy committee during the spring.”
Mortgage servicers and financial institutions will want to keep abreast of progress regarding these bills and be prepared to comply quickly if passed. The Mortgage Deferment Act contains language that is “an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect.” It is likely that similar language will be included in the other legislation as well.
California Attorney General Rob Bonta also has been vocal about protecting the rights of wildfire victims, including prohibiting price gouging and other scams. We should expect, given Bonta’s public support and advocacy for consumer protection and consumer financial protection (alongside the CFPB), that Bonta and the California Department of Justice will be active in protecting consumers who may allege unfair treatment in connection with financial hardships stemming from the wildfires.
Stay tuned for additional updates and developments.
