Servicers face tighter denial rules, mandatory deferral options, and new documentation hurdles
California doubled the mortgage forbearance window for wildfire-affected homeowners to two years under a bill Governor Gavin Newsom signed on September 15.
The legislation, Assembly Bill 1847, was authored by Assemblymember John Harabedian (D-Pasadena). It amends Civil Code Sections 3273.23 and 3273.24, expanding protections tied to the January 2025 wildfire emergencies - the Eaton Wildfire, the Palisades Fire, and the Straight-line Winds event.
Under prior law, borrowers facing financial hardship from those disasters could request up to 12 months of forbearance on residential mortgage loans, with a deadline of January 7, 2027. The new law pushes both limits. Forbearance now runs up to 24 months, and borrowers have until January 7, 2029, to apply.
The extension adds a new condition. Borrowers must now affirm not only financial hardship but that the property securing the loan is uninhabitable because of the wildfire disaster.
For servicers, the operational changes run deeper than the timeline.
When a borrower seeks forbearance beyond 12 months, servicers may request additional documentation - but only if the investor, guarantor, insurer, or holder of the loan has first made a written request for it and the documents relate to the borrower's hardship, the property's habitability, or restoration efforts.
The notification window shifted. Servicers previously had 10 business days to approve or deny a request. That is now 21 days, extendable by agreement when additional documentation is involved. If a servicer denies a request under delegated investor authority, written notice is required - including the text of the guideline behind the denial.
Curable defects get their own process: servicers must identify the issue, give borrowers 21 calendar days to fix it, and respond within five business days.
After forbearance ends, servicers must offer borrowers the option to defer forborne amounts to the end of the loan term. Borrowers current when they entered forbearance cannot be required to make a lump sum payment.
Late fees and default interest remain prohibited during forbearance, and the law extends that protection to the waiting period while the servicer decides on a request.
On credit reporting, servicers cannot report payments as in forbearance during the relief period. Accounts are reported as current, or if the borrower was delinquent before the disaster, the servicer maintains that status until the borrower catches up.
For servicers with California wildfire-affected portfolios, the law reshapes the forbearance playbook - longer timelines, tighter denial rules, and a mandatory deferral option that narrows the repayment menu.
