How Los Angeles wildfire victims can get mortgage payment relief

By Jeff Lazerson | jlazerson@mortgagegrader.com | MortgageGrader.com | January 20, 2025

 An abbreviated version of this article was originally posted in Orange County Register on January 16, 2025

If your home is damaged or destroyed by the Los Angeles wildfires, or from any disaster for that matter, the second call you should make is to your mortgage loan servicer (the first call should be to file a claim with your homeowners insurance carrier).

You may be able to get payment relief in the form of a monthly mortgage payment forbearance.

Your loan may be owned by Fannie Mae or Freddie Mac even though you make your mortgage payment to ABC mortgage company. If either government institution owns the mortgage, you have up to 12 months of payment forbearance without incurring late fees or penalties.

Freddie Mac also covers homeowners whose places of employment have been impacted, resulting in a financial hardship that prevents them from being able to make their monthly payment.

Homeowners have several options to make up the missed payments, including additional forbearance if needed, according to a Freddie press release.

Reinstatement, repayment plan, payment deferral and loan modification are all available for consideration from Freddie Mac.

Your loan servicer can tell you if either mortgage giant owns your loan, or search for “lookup tools” offered by Fannie Mae and Freddie Mac.

The U.S. Department of Housing and Urban Development (HUD) allows up to 12 months of payment forbearance on FHA mortgages for any area under a presidential disaster declaration.

If you have a VA mortgage, the U.S. Department of Veterans Affairs encourages loan servicers to extend all possible forbearance to borrowers in distress, according to Susan Carter, its director of media relations. This includes forbearance requests, moratorium on foreclosure and late charge waivers.

Chase Bank offers forbearance for three months. It is then extendable in three month increments up to 12 months. Forbearance exits can vary because they are unique to the customer’s circumstances and dependent on the loan investor/insurer. The customer is evaluated for loss mitigation options which could result in a deferment of missed payments, according to a Chase Bank spokeswoman.

Bank of America has a Client Assistance Program offering forbearance and other options. BofA also offers assistance for business owners whose establishment was affected by the wildfires, according to spokesperson Carla Molina.

Wells Fargo Bank customers can contact the Disaster Assistance team, according to spokesperson Laurie Knight.

Do not assume you will automatically receive some type of mortgage payment forbearance. If you have an exotic mortgage or so-called non-QM loan or a private party mortgage, there may be no options for payment forbearance.

“The borrower is still responsible for making mortgage payments,” said Eric Morgenson, vice president of business development, Angel Oak Mortgage Solutions, a non-QM lender.

Full disclosure: My firm is an approved broker with Angel Oak.

Assembly Bill 238, called the Mortgage Deferment Act, was introduced on January 13 and listed as pending in the California legislature. If approved, it would override any lenders’ unwillingness to offer payment forbearance.

The bill allows borrowers to request an initial pause of their monthly mortgage payments for up to 360 days to provide financial relief to those who have lost their homes or livelihood to wildfire.

Borrowers with mortgages on homes, condos townhouses and rental property with one to four units in Los Angeles County would be eligible for payment delays if they are experiencing financial hardship due to the effects of the wildfire (loss of home or income disruption).

The missed payments must be repaid, although it may be paid back over time.

Next on your checklist should be to make a claim with the Federal Emergency Management Agency or FEMA by downloading the FEMA application at www.disasterassistance.gov. FEMA assists with food, water, medication, formula, home repairs and hotel reimbursements, for example.

“The window for registration is two to three months at least. Right now, there is no ending date,” said Michael Hart, FEMA spokesperson. “These are grants, not loans available to a maximum amount of just under $44,000. FEMA will not duplicate what your homeowner’s insurance company is already covering.”

Property tax relief

If you have experienced more than $10,000 of current market value damage to your property, you have 12 months from the date of the damage to file a “Misfortune and Calamity” (M&C) claim with the Los Angeles County Tax Assessors Office.

Approved claims may result in temporary property tax relief, with adjustments made to reflect the reduced value of your property until repairs or rebuilding are completed.

The second half of property taxes are due on February 1. Late charges will hit you if you don’t pay the bill by April 10.

Los Angeles County Assessor Jeff Prang urges you to file your claim right away. “(assuming relief is granted) This will automatically defer your payment to the tax collector,” said Prang.

“Once the M&C relief is granted, there is no time provision for when they (property owners) must make repairs,” said Jerry House, director of district appraisals at the LA County Office of the Assessor. “So, if M&C relief is granted on a property and six years goes by without repairs, the reduction will remain in effect.”

Prang noted his office has identified 17,000 to 18,000 structures either destroyed or damaged. He is seeking state legislation that would allow for a decline in value to be applied for this fiscal year since the assessment deadline has already passed.

You should also file a Proposition 8 claim form or a Decline-in-value Reassessment Application with the Los Angeles County Assessors office.

What’s the difference between M&C and Proposition 8?

“Misfortune and Calamity is applied to the damage to improvements as a result of a flood, fire or earthquake, etc.,” said Prang. “A decline in value (Proposition 8) is applicable to both the land and the improvement to reflect an economic impact, usually the result of a recession.”

Prang noted that (on average) 68% of the value is in the land. Some of the land value may be reduced under Proposition 8.

Prang also pointed to Proposition 19. “Proposition 19 allows the property owner to transfer their tax base to a new home anywhere in California. They have two years to affect the transfer,” he said. “I am certain that many fire victims may find this to be easier than the rebuilding process.”

Freddie Mac rate news: The 30-year fixed rate averaged 7.04%, 11 basis points higher than last week. The 15-year fixed rate averaged 6.27%, 13 basis points higher than last week.

The Mortgage Bankers Association reported a 33.3% mortgage application increase compared to one week ago, which also includes an adjustment for the New Year’s holiday.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $806,500 loan, last year’s payment was $236 less than this week’s payment of $5,387.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.875%, a 15-year conventional at 5.625%, a 30-year conventional at 6.5%, a 15-year conventional high balance at 5.99% ($806,501 to $1,209,750 in LA and OC and $806,501 to $1,077,550 in San Diego), a 30-year high-balance conventional at 6.75% and a jumbo 30-year fixed at 6.75%.

Eye-catcher loan program of the week: A 30-year mortgage, with 30% down, locked for the first 5 years at 6.25% with 1 point cost.

Jeff Lazerson, president of Mortgage Grader, can be reached at 949-322-8640 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.

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* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.