An aerial vision of the clear properties of forest fires that burned in the Eaton fire on July 3, 2025 in Altadena, California.
Mario Tama | Getty Images News | Getty images
The legislature of the State of California approved a bill on Monday that guarantees that the owners, not lenders, receive at least some of the interest on the insurance payments for housing destroyed or damaged by natural disasters.
The legislation occurs after thousands of owners lost their residences in the historical forest fires of January in southern California. After such a loss, insurers send checks generally are carried out together with both the owner and the mortgage lender or the administrator. The lender will deposit the funds in a warranty deposit account, where the lender wins the lender could maintain.
The California Assembly, John Harabedian, D-Pasadena, the author of the bill, said he is struggling to change that after listening to his voters about his struggles that receive payments of liberated insurance from their lenders.
“If the owners do not receive their money immediately, the interest in that money, that banks and mortgage lenders are retaining and winning [interest on]The owner must be paid, not the banks, “Harabedian told CNBC.” The more we investigated this, the more we realized that this was a big problem in all areas. “
The bill will now go to the desk of Governor Gavin Newsom to be signed.
After a disaster, the Mortgage Services Company can often perform insurance settlement checks in a guarantee deposit account until reconstruction is completed, which can take months or even years. During this time, funds can accumulate a significant interest that the services company could maintain.
Now, the owner will guarantee at least 2% interest in those funds.
The invoice will apply to both existing insurance payments that are still kept in custody accounts and any new guarantee deposit account that is opened after a catastrophic event. For any funds that are already in a guarantee deposit account, 2% simple interest per year will begin to accumulate on the date of validity of the invoice.
Newsom, who sponsored state legislation, said that owners are rebuilt after a disaster need all the support they can obtain.
“This is a common sense solution that ensures that [homeowners] Receive all available resources to help them recover and rebuild, “said Newsom in a statement in February when the bill was presented for the first time.
California's Law had already demanded that lenders pay interest to owners on funds covered with funds for property and insurance taxes, but did not explicitly included insurance payments. The bill aims to close that escape.
“It is sad that we have to present a bill so that banks and mortgage lenders do the right thing, but it is about the owners obtaining all the financial aid they can during this difficult period,” said Harabedian.
