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Assembly banking panel advances bill to require interest on escrowed post-loss insurance payouts
Summary
The Assembly Banking and Finance Committee voted to due-pass AB 493 and refer it to Appropriations after supporters said the bill would ensure homeowners receive interest on insurance payouts held in escrow after losses, while the banking industry urged technical alignment with existing mortgage law.
The Assembly Banking and Finance Committee voted to due-pass AB 493 and referred the measure to the Committee on Appropriations after proponents said the bill would require lenders to pay interest on post-loss insurance payouts that remain held in escrow, giving wildfire survivors more money to rebuild.
Assemblymember Harbidian, the bill’s author, told the committee that California law already requires lenders to pay interest on some escrow funds, such as property tax escrows, but that “post loss insurance payouts are excluded from this requirement, allowing lenders and banks to retain interest rather than passing it on to the homeowners.” He said that exclusion “hurts wildfire survivors” and cited recent large-loss events as examples of homeowners facing long rebuilding timelines.
Robert Harel, executive director of the Consumer Federation of California, urged support and described the change as closing a loophole. “This 2% is not a lot to be getting on interest, especially given the past couple 3 years. But this does not harm consumers. In fact, it actually helps them a little bit as they go through this unbelievable task,” Harel said, referencing the extended time some communities have needed to rebuild after major fires.
Andrea McDonald, representing a bankers’ trade group, said the association was not opposing the bill but had “expressed some concerns to the author and the Governor’s office.” McDonald recommended aligning the bill with the California Residential Mortgage Lending Act, noting that the existing law “prohibits servicers, independent mortgage bank servicers, from holding these escrows in an interest bearing account,” and asked the author’s office to address that technical issue.
The author’s office clarified to the committee that AB 493 applies only to insurance payouts that remain held in escrow on or after the bill’s effective date, and that funds disbursed before the effective date would not be subject to the interest requirement.
On the motion to “due pass and refer to committee on appropriations,” the committee recorded eight affirmative votes and forwarded the bill. Members recorded as voting Aye were Assemblymember Valencia; Vice Chair Chen; Assemblymember Dixon; Assemblymember Fong; Assemblymember Krell; Assemblymember Michelle Rodriguez; Assemblymember Blanca Rubio; and Assemblymember Schiavo. The committee did not record any opposition votes on the floor call reported in the transcript.
With the committee’s referral, AB 493 will next be considered by the Appropriations Committee. The Banking and Finance Committee adjourned after the vote.
