Mortgage lenders probed over how they handled L.A. wildfire insurance payouts

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Set us as preferred California regulators on Thursday ordered the state’s licensed mortgage lenders and servicers to provide data on how they have handled the release of home insurance proceeds after complaints by January 2025 fire victims that their money was improperly withheld.Insurance payouts for mortgaged homes damaged or destroyed by fires are typically not sent directly to homeowners but are held by lenders or servicers, who then disburse the funds in tranches as a home is rebuilt or repaired.There were widespread complaints by survivors following the fires in Pacific Palisades, Altadena and nearby communities that destroyed more than 11,000 single-family homes that their reconstruction work was being held by up delays in getting the proceeds.

The state Department of Financial Protection and Innovation has reported receiving more than 160 complaints.Business California Gov.

Gavin Newsom signed two bills extending mortgage relief to victims of the January 2025 wildfires in Los Angeles County and other state disasters.The growing ire of homeowners prompted Gov.Gavin Newsom to send letters on July 14 to California Mortgage Bankers Association, the California Bankers Association and the California’s Credit Unions trade groups complaining about “unnecessary red tape and excessively withholding funds,” noting some survivors were waiting over a month for proceeds.The letter noted that he had asked the DFPI and the Business and Consumer Services Agency to collect data on financial institutions that failed to release insurance proceeds within 10 business days, that failed to establish an expedited appeals process regarding disputed funds and that held proceeds in excess of the outstanding mortgage loan amounts.Thursday’s action ramps up the pressure on the institutions, which were sent a document by the DFPI demandi...