Newsom wants homeowners in burn areas to get interest earned on insurance payouts
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As Los Angeles reels from the devastation of the Palisades and Eaton fires, Gov. Gavin Newsom plans to sponsor a bill that would ensure that homeowners, not lenders, benefit from interest earned on insurance payouts for destroyed or damaged properties, according to his office.
“Homeowners rebuilding after a disaster need all the support they can get, including the interest earned on their insurance funds,” Newsom said in a statement announcing the planned bill.
A.B. 238, which would make it easy for victims of the Los Angeles County wildfires to get mortgage relief, will proceed despite voluntary agreements Gov. Newsom reached with hundreds of lenders.
The state bill will be authored by Assemblymember John Harabedian (D-Pasadena). A spokesperson for Newsom’s office said the bill is expected to be introduced by the end of the month.
Insurance payouts can accrue significant interest while the money sits in escrow during rebuilding, bill proponents say. California law already requires lenders to pay homeowners the interest on escrowed funds for property taxes and insurance but not for insurance payouts held in escrow, according to the governor’s office.
A spokesperson for Newsom’s office said that interest rates are typically about 2% annually, which would amount to roughly $20,000 a year for a $1-million payout for a destroyed home.
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