Golden State Today

Governor Gavin Newsom is backing a new legislative proposal aimed at benefiting homeowners affected by disasters in California. The proposed legislation would allow homeowners, rather than lenders, to receive the interest accrued on insurance payouts for lost or damaged property. This initiative is particularly focused on aiding those impacted by California's destructive wildfires.

Assemblymember John Harabedian (D-Pasadena) authored the legislation to address an imbalance in existing law that permits lenders to collect interest on insurance funds held in escrow following a disaster. Harabedian emphasized, “Homeowners, not insurance companies, should receive the interest earned on their insurance payouts. Many Angelenos devastated by these wildfires have lost nearly everything; they are struggling and need every bit of financial support. This bill puts people over profits, ensuring that rightful insurance payments go to those who need them most.”

The current legal framework requires lenders to pay homeowners interest on escrowed funds for property taxes and insurance but does not extend this requirement to post-loss insurance payouts. The new bill seeks to amend state law so that lenders must pay homeowners the interest earned on these specific funds as well.

Governor Newsom remarked, “Homeowners rebuilding after a disaster need all the support they can get, including the interest earned on their insurance funds. This is a commonsense solution that ensures that they receive every resource available to help them recover and rebuild.”

The announcement comes as part of broader efforts by Governor Newsom's administration to aid recovery from recent firestorms in Los Angeles County. Measures include executive orders to expedite rebuilding processes by suspending certain permitting requirements and providing tax relief for affected residents and businesses.

For Californians impacted by the fires, resources are available through CA.gov/LAfires—a central hub for information from state, local, and federal sources—and other channels such as DisasterAssistance.gov.