Assembly committee advances bill to extend mortgage forbearance for L.A. wildfire survivors

Assemblymember Isaac Harabedian urged the Assembly Judiciary Committee on Wednesday to advance AB 238, legislation that would allow borrowers affected by recent Los Angeles wildfires to request an initial mortgage forbearance for up to 180 days with the option to extend for up to one year total.

The measure, Harabedian said, is intended to prevent a wave of foreclosures among wildfire survivors who lost homes or were displaced. "Entire neighborhoods have been wiped out," Harabedian said. "More than 16,000 structures have been destroyed, and 50,000 residents have been displaced." He told the committee that without relief, "these mounting financial burdens could trigger a wave of foreclosures, deepening economic instability in communities already reeling from devastation."

The bill would let borrowers request an initial forbearance of up to 180 days and allow extensions so a borrower may receive up to one year of total forbearance, as described by the author. Harabedian noted that more than 400 financial institutions had voluntarily agreed to an initial 90-day forbearance program that requires no documentation and avoids balloon payments, and he said AB 238 would provide a clearer statutory safety net for survivors during a longer recovery period.

Renee Bayardo, testifying for RISE Economy and HPP CARES, described counseling work at disaster resource centers and urged support. "These families face the overwhelming challenge of managing mortgage payments for homes that no longer exist," Bayardo said, adding that displaced residents often must pay both rent and mortgage while rebuilding.

Representatives of industry and mortgage servicers thanked the author for outreach but raised implementation concerns. Vanessa Lugo of the California Bankers Association said banks and servicers had already offered outreach and short-term relief, and warned that the bill in its current form could create unintended market disruptions. "Even before this measure was introduced, banks and financial institutions were already outreaching and working proactively and constructively with customers to minimize the adverse financial effects of the crisis," Lugo said.

Indira McDonald of the California Mortgage Bankers Association said servicers are bound by investor and GSE (government-sponsored enterprise) guidelines — from Fannie Mae, Freddie Mac, the Federal Housing Administration and others — that require servicers to follow specific loss-mitigation rules and could leave servicers caught between state law and contractual obligations to investors. "As drafted, AB 238 creates the risk of servicers getting caught between state law and their contractual obligations to the investors," McDonald testified, urging amendments that would deem compliance with existing investor and GSE programs to satisfy the bill.

Harabedian told the committee he is negotiating amendments, including documentation check-ins after the first 180 days and working with industry on conflicts with investor guidelines. He said the bill had no formal opposition on the record, only concerns, and thanked the governor for an executive action that had earlier produced a 90-day industry agreement.

After discussion, the committee voted to send AB 238 to the Appropriations Committee. The committee record shows the motion carried and the measure was referred to Appropriations for further consideration.

The author and witnesses said they will continue to refine the bill language to address servicer and investor concerns while preserving longer-term relief for survivors.

Ending details: Supporters listed during the hearing included SEIU, the California Apartment Association and California Professional Firefighters; witnesses and trade groups who registered concerns included the California Bankers Association, the California Mortgage Bankers Association, the California Association of Realtors and various credit union and mortgage industry groups. The committee action sends the bill to Appropriations, where financial and regulatory conflicts will likely be a focus of further amendments.