State regulators have ordered about 800 lenders to explain how they disbursed fire insurance proceeds to LA survivors
California’s state regulators ordered roughly 800 mortgage lenders and servicers this week to account for how they have managed insurance payouts to survivors of the January 2025 Los Angeles wildfires, warning that those found to have delayed or withheld funds could face state and federal enforcement.
Issued October 15 by California’s Business and Consumer Services Agency (BCSA) and the Department of Financial Protection and Innovation (DFPI), the order requires institutions to report, as of September 30, on the size and distribution of proceeds received, whether all funds were disbursed to fire victims, how long each disbursement took, and the reasons for any delays or withheld amounts. The deadline to respond is October 29.
The Eaton and Palisades fires of January 2025 destroyed more than 11,000 single-family homes across Los Angeles County, California.
When a mortgaged home is damaged, insurers typically route payouts through the lender, which holds the money in escrow and releases it in stages as rebuilding progresses — a process that survivors say has been mired in documentation demands and unexplained holds, deepening the post-wildfire housing crisis facing California homeowners and brokers.
Escrow delays compounding hardship for survivors
The DFPI has logged more than 160 confidential consumer complaints about delayed or withheld proceeds since January 2025.
In July 2026, Gov. Gavin Newsom wrote to the California Mortgage Bankers Association (CMBA), the California Bankers Association (CBA), and California’s credit unions, flagging “unnecessary red tape” and directing state agencies to collect data on institutions holding funds beyond 10 business days.
“It’s unacceptable that after running through a gauntlet of paperwork to file insurance claims, some wildfire survivors still have not gotten access to the funds they need to rebuild,” said Rohit Chopra, secretary of California’s Business and Consumer Services Agency.
Joy Chen, executive director of Every Fire Survivor’s Network — a nonprofit led by survivors of the January 2025 Los Angeles-area fires — was pointed: “Every day that they wait to pay us, they’re collecting interest. And that interest really belongs to us.”
What servicers and brokers need to know
Regulators are scrutinizing three specific benchmarks from Newsom’s July letter: whether lenders released proceeds within 10 business days, provided an expedited appeals process for disputed disbursements, and avoided holding funds above the outstanding loan balance.
Violations could trigger enforcement under state and federal consumer protection laws. Assembly Bill 493 (AB 493), signed by Newsom in August 2025, separately requires lenders to pay homeowners at least 2% simple annual interest on post-loss proceeds held during rebuilding.
Paul Gigliotti, chief executive of the CMBA, said the group is urging servicers “to review their staffing, inspection practices, disbursement timelines, and appeal processes,” adding that servicers and survivors “share the same goal of getting homes rebuilt.”
For California’s mortgage brokers, the regulatory pressure lands on top of the affordability headwinds already confronting state borrowers, a market where elevated rates and surging insurance costs are directly cutting into client qualification.
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