California Assembly introduces AB 238 to provide mortgage forbearance for wildfire victims

California Assembly Bill 238, introduced on January 13, 2025, aims to provide immediate mortgage forbearance relief for homeowners affected by wildfires in the state. The bill, spearheaded by Assembly Members Harabedian and Irwin, responds to the state of emergency declared by Governor Gavin Newsom on January 7, 2025, due to ongoing wildfire disasters.

The key provisions of AB 238 allow borrowers facing financial hardship from the wildfires to request a forbearance on their mortgage loans. Under the proposed legislation, mortgage servicers would be required to grant forbearance for up to 180 days based solely on the borrower’s attestation of financial hardship, without the need for additional documentation. This forbearance could be extended for another 180 days upon request. Furthermore, the bill prohibits mortgage servicers from initiating foreclosure processes during this period, ensuring that affected homeowners have a reprieve from potential eviction or foreclosure sales.

The bill has garnered strong support from Democratic lawmakers, with a notable 10-1 partisan spectrum. However, it also raises concerns regarding the potential for increased instances of perjury, as borrowers must affirm their financial hardship. This aspect has sparked debates about the balance between providing necessary relief and preventing abuse of the system.

Economically, AB 238 could alleviate immediate financial pressures on homeowners, allowing them to recover from the devastating impacts of wildfires without the added stress of mortgage payments. Socially, it aims to provide stability for families during a time of crisis, reflecting a broader commitment to disaster relief in California.

As the bill moves to committee hearings scheduled for February 13, 2025, its urgency and implications for both homeowners and mortgage servicers will likely be focal points of discussion. If passed, AB 238 could set a precedent for future disaster-related financial relief measures in California, highlighting the state's proactive approach to addressing the challenges posed by climate-related emergencies.