California Law Mandates Mortgage Forbearance for 2025 Wildfire-Affected Homeowners

Following the January 2025 wildfires in the Los Angeles area, California enacted Assembly Bill 238 to mandate mortgage forbearance for affected homeowners. Previously, mortgage servicers and lenders voluntarily offered up to 90 days of forbearance, but there was no legal obligation to do so. This new law requires servicers to provide mortgage forbearance to homeowners facing financial hardship directly caused by the wildfires, with an initial period of 90 days and possible extensions up to 12 months. Homeowners must affirm their hardship and request forbearance before deadlines set by the law, and servicers are required to respond within ten business days. During the forbearance period, servicers cannot charge late fees or interest and must report the mortgage status as current to credit agencies unless the homeowner was already in default prior to the wildfire. Foreclosure actions are prohibited while a homeowner complies with the terms of the forbearance. The law allows servicers of federally-backed loans to follow federal guidance if it conflicts with state mandates, and non-federally-backed loan servicers may opt to comply with Fannie Mae or Freddie Mac guidelines instead. The law addresses challenges for underinsured homeowners whose insurance payouts do not cover rebuilding or mortgage balances, emphasizing the necessity for servicers and homeowners to negotiate affordable repayment plans. Homeowners can find assistance through California's Department of Financial Protection and Innovation and are encouraged to report unfair treatment during the forbearance process. This legislation aims to provide legal protection and financial relief for wildfire-affected homeowners as they manage recovery and rebuild their homes.