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Panel advances bill to require interest on escrowed post-loss insurance payouts
Summary
The Senate Committee on Banking and Financial Institutions voted to send Assembly Bill 493 to Senate Judiciary after approving a measure to require lenders to pay interest (at least 2%) on insurance payouts held in escrow following a loss, closing a court-created exemption for such funds.
The Senate Committee on Banking and Financial Institutions voted to refer Assembly Bill 493, authored by Assemblymember Harbedian, to the Senate Judiciary Committee after testimony on changes to how lenders handle post-loss insurance payouts.
Assemblymember Harbedian told the committee that recent California court decisions have allowed lenders to retain interest on insurance payouts held in escrow after a loss. He said AB 493 ‘‘seeks to support and protect homeowners by eliminating the exemption on post loss insurance payouts,’’ and would require that homeowners receive at least 2% interest on those insurance payouts while the funds remain in escrow.
Harbedian said the bill was recently amended so it applies to all loans regardless of origination date for post-loss insurance payments made on or after Jan. 1, 2026, and that, for properties affected by the Los Angeles wildfires, the bill would also cover payments made in 2025 provided the funds remain in escrow.
Witnesses from the real estate and banking industries spoke in support or to note technical changes. Cesar Diaz identified himself in support on behalf of the County of Los Angeles; Sean Bellak said the California Association of Realtors supported the bill; Indira McDonald of the California Mortgage Bankers Association said amendments addressed initial concerns by adding conformity to the Residential Mortgage Lending Act so mortgage banks can hold funds in deposit accounts that earn interest. Vanessa Lugo of the California Bankers Association and Randy Pollock of the Consumer Data Industry Association said they had negotiated language with the author and anticipated further compliance-related tightening.
Assemblymember Harbedian said AB 493 had ‘‘no opposition’’ on the hearing record and asked for the committee’s aye vote. The committee passed the measure to Senate Judiciary; the committee recorded seven affirmative votes and reported the bill out of committee.
AB 493 will move to the Senate Judiciary Committee for further review and possible amendments.
