LOS ANGELES — As part of the state’s ongoing efforts to support survivors of the LA-area firestorm, Governor Newsom on February 10 announced sponsoring new legislation to ensure homeowners, not lenders, benefit from the interest earned on insurance payouts, particularly those impacted by California’s most destructive wildfires. 

The legislation, authored by Assemblymember John Haradebian (D - Pasadena), seeks to correct an inequity in current law that allows lenders to collect interest on insurance funds held in escrow after a disaster.

“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,” said Governor Gavin Newsom. 

The legislation, authored by Assemblymember John Haradebian (D-Pasadena), seeks to correct an inequity in current law that allows lenders to collect interest on insurance funds held in escrow after a disaster. 

After a disaster, insurance payouts are held in escrow until rebuilding is complete, which can take months or even years. During this time, these funds can accrue significant interest.

While California law requires lenders to pay homeowners interest on escrowed funds for property taxes and insurance, it does not extend this requirement to insurance payouts held in escrow. This legislation would amend state law to explicitly require lenders to pay homeowners the interest earned on post-loss insurance payouts, just as they do for other escrowed property expenses.

 (Photo Source：The Governor Office Newsroom)