Californian homeowners affected by wildfires over the past two years may soon be eligible for additional mortgage relief.
California Gov. Gavin Newsom this week proposed a $125 million finance package made up of $100 million for direct mortgage assistance and $25 million to expand an existing mortgage counseling program to help homeowners hit by disasters in the state, according to a news release.
If approved, the funding would provide relief for homeowners at risk of foreclosure whose property was either destroyed or substantially damaged in any natural disaster declared an emergency since Jan. 1, 2023. That includes people affected by last month’s Palisades and Eaton fires that destroyed about 11,000 homes totaling just shy of $30 billion, as well as those homeowners affected by 2024’s Park and Franklin fires.
“As survivors heal from the trauma of recent disasters, the threat of foreclosure should be the last thing on their minds,” Newsom said in a statement. “This disaster mortgage relief program would help lift this burden and give families more time to focus on recovery.”
Because mortgage payments are based on a loan agreement and not the condition of a property, borrowers are still responsible for mortgage payments even if their house is damaged or destroyed in a natural disaster such as a wildfire.
If needed approvals are obtained, funding from the package would be administered by the California Housing Finance Agency. CalHFA is set to consider the governor’s plan at its meeting on Thursday.
The proposal comes as banks and lenders have already committed to offering mortgage relief for borrowers affected by the recent firestorm.
Last month, Newsom announced that Bank of America, Citi, JPMorgan Chase, U.S. Bank and Wells Fargo would offer 90-day mortgage payment forbearance periods, relief from late fees accrued during that period and protection from foreclosures and evictions for at least 60 days. Some state-chartered lenders have made similar commitments.
Government-backed lenders Freddie Mac and Fannie Mae have also offered such relief to borrowers affected by last month’s fires. Homeowners who hold single-family mortgages through either company could be eligible for up to 12 months of relief without late fees or penalties, both firms said last month.
It’s important to note, though, that while forbearance programs typically do not count against a borrower’s credit score, they can make it harder to borrow credit in the future. To receive relief and understand the implications of each of their options, borrowers should reach out to their mortgage servicers.