Mortgage Relief in Sight for California Homeowners as $125 Million Package Is Proposed

California Gov. Gavin Newsom has proposed a mortgage relief package totaling more than $125 million that would benefit victims of recent natural disasters, including the unprecedented wildfires that devastated Los Angeles County in January.  

The plan unveiled by Newsom on Wednesday earmarks over $100 million in direct mortgage assistance for homeowners at risk of foreclosure and whose property was either destroyed or heavily damaged as a result of a declared emergency since Jan. 1, 2023.

An additional $25 million would go toward extending an existing program that provides mortgage counseling and offers guidance on FEMA disaster assistance to help victims get back on their feet.  

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

Funding for the relief package would come from existing settlement funds that then-California Attorney General Kamala Harris secured from multiple mortgage servicers a decade ago, resolving allegations of misconduct during the Great Recession of 2007–09.

Newsom’s office stressed that the mortgage assistance plan would not affect the state’s budget.

Newsom’s proposal is currently pending approval by the California Housing Finance Agency board, which is set to consider it during its next meeting scheduled for Thursday.

If the plan gets the green light, CalHFA will be in charge of administering the funds.

The program is not limited to victims of the Palisades and Eaton fires, which killed 29 people and ravaged massive swathes of the Pacific Palisades and Altadena communities outside Los Angeles.

Survivors of past disasters, including the Park fire that wreaked havoc in Northern California’s Butte and Tehama counties in July 2024, and the Franklin fire that scorched the wealthy enclave of Malibu in December 2024, also would be eligible to apply for help.

Newsom’s latest relief effort comes after the governor announced last month that five major mortgage lenders, among them Bank of America and Citi, have agreed to offer homeowners affected by the Palisades and Eaton fires a 90-day grace period on mortgage payments, a 90-day waiver of late fees, and a moratorium on new foreclosures. 

Typically, even if a house is razed or significantly damaged by a natural disaster, the homeowner is still responsible for making mortgage payments to the lender while paying rent for temporary housing.

Most standard homeowners insurance policies cover damage caused by natural disasters. However, in California, hundreds of thousands of people have found themselves uninsured or underinsured, after several national carriers had stopped providing coverage over mounting wildfire risks.

Homeowners living in high-risk areas have been forced to turn to California’s insurer of last resort, FAIR Plan, which offers bare-bones coverage for higher premiums than private insurance providers.

The L.A. fires, which wiped out about 12,000 homes, are expected to be the costliest in U.S. history, having caused up to $164 billion in property and financial loss, with insured losses potentially reaching $75 billion, according to recent estimates from the UCLA Anderson Forecast.

The California Department of Insurance’s wildfire claims tracker, last updated on Feb. 5, shows that insurers so far have paid out just under $7 billion in claims to victims.

In the immediate aftermath of the January fires, California’s insurance authority imposed a yearlong ban on policy cancellations in areas affected the worst by the disaster.

The moratorium came after the state insurance commission announced a new rule requiring private insurance companies to start writing new policies in high-risk areas if they wanted to continue doing business in California—but they were permitted to pass the additional costs on to the consumers.