California Homeowners to Get Mortgage Help Under New Plan

California Governor Gavin Newsom announced on Wednesday homeowners could receive mortgage help under a new proposed plan after the Los Angeles wildfires caused enormous losses last month.

Newsweek has reached out to Newsom’s office via email for comment.

Why It Matters

The blazes that ravaged Los Angeles County in January are estimated to be the largest wildfire-insured loss in American history, having caused billions in damages. According to official data, the wildfires damaged or destroyed more than 17,000 structures, including thousands of homes.

What To Know

Newsom announced on Wednesday a new proposal that will create a $125 million mortgage relief program to assist homeowners at risk of foreclosure or whose homes were destroyed or severely damaged by recent natural disasters dating back to 2023.

This means victims of the Park, Franklin, Palisades and Eaton fires could be eligible for relief.

Newsom’s office noted that the relief package would not impact the proposed 2025-26 budget and instead be funded by using an existing mortgage settlement fund that was reached by then-California Attorney General Kamala Harris with big lenders in the wake of the Great Recession.

According to Newsom, if approved, the package will be administered by the California Housing Finance Agency (CalFHA), which oversees those settlement funds, and will include over $100 million in direct mortgage assistance.

In addition, funding for the program would also extend an existing counseling services program, which helps affected homeowners navigate their recovery.

“As survivors heal from the trauma of recent disasters, the threat of foreclosure should be the last thing on their minds. This disaster mortgage relief program would help lift this burden and give families more time to focus on recovery,” Newsom said in a press release.

Meanwhile, hoping to provide some temporary help, Newsom has also recently secured agreements with major banks and hundreds of state-chartered lenders to offer a simplified process granting fire victims a 90-day pause on their mortgage payments.

California Insurance Coverage Concerns

However, the proposed program comes as California homeowners are still facing financial and insurance coverage uncertainty in the wake of the LA fires.

State Farm General, the state’s largest insurer, has asked for an emergency insurance rate increase as high as 22 percent for some homeowners. State Farm General covers more than 2.8 million policyholders in California.

The insurance firm had requested an increase in rates of 22 percent for non-tenant homeowners, 15 percent for renters, 15 percent for condominium unit owners, and 38 percent for “Rental Dwelling.” If approved, the new rates would have taken effect on May 1.

However, on Friday, insurance commissioner Ricardo Lara turned down the request, stating that State Farm has not demonstrated a need for the increase nor clarified how the additional premium revenue would influence its previous decisions to halt the issuance of new home policies in the state.

Lara also said he had several questions regarding the financial viability of State Farm despite previous rate hikes and whether it has provided “adequate documentation to justify” the cost increase.

State Farm General confirmed last week it has received more than 8,700 claims and has already paid more than $1 billion to customers in the aftermath of the Los Angeles fires, and said the incidents “will further deplete capital from State Farm General.”

In a previous statement sent to Newsweek on Monday, a spokesperson for State Farm said: “We have gone to great lengths to clearly answer the questions outlined by the Commissioner. While we’re positioned to handle all of the claims associated with the most recent wildfires, State Farm General must seriously consider its options within the California insurance market going forward.”

What People Are Saying

California Governor Gavin Newsom said in a post on X, formerly Twitter, on Wednesday: “Following the recent LA fires, I am proposing $125 million in mortgage relief for homeowners who have been impacted by natural disasters since 2023 and are at risk of foreclosure. The threat of foreclosure should be the last thing on the minds of survivors of these disasters.”

Commissioner Lara in a statement issued on February 14: “Our decisions must be guided by transparent data and an honest reckoning with the challenges we all face together. As the elected head of the Department, my primary responsibility is to the people of California. This situation highlights the voters’ wisdom in having an independent, elected Insurance Commissioner making decisions to uphold market integrity in response to evolving threats, which today include climate change, rising global reinsurance costs, and a tightening national property insurance market.”

What Happens Next

The proposal will be considered at the CalHFA’s next meeting on February 20. If approved, the direct assistance program and eligibility criteria will be developed and announced in more detail.