Natural disaster victims would get six months of mortgage relief under Senate bill

CNBC

31-07-2025

LOS ANGELES — Natural disaster survivors would be eligible for six months of mortgage relief under a bill introduced Thursday by two senators whose states have been ravaged by wildfires and floods.
The Mortgage Relief for Disaster Survivors Act would apply to homeowners with federally backed loans in areas declared disasters since Jan. 1 without accumulating interest or penalties during the six-month period. Borrowers could apply for additional six-month extensions.
"Earlier this year, we watched as families in Los Angeles were devastated by wildfires, and to date, many homeowners are still struggling to rebuild from this disaster," said Sen. Adam Schiff, D-Calif., who is co-sponsoring the bill.
"As natural disasters become more frequent due to climate change, it is critical that we pave a path to stability for homeowners in times of crisis," he added.
Parts of Schiff's former congressional district in Southern California were devoured in January when the Eaton Fire tore through Altadena, destroying nearly 6,000 homes and killing at least 19 people.
His co-sponsor is Sen. Michael Bennet, D-Colo., whose state was ravaged by the 2021 Marshall Fire, which damaged or destroyed some 1,200 homes in Boulder County.
"Coloradans know all too well how difficult it is to pick up the pieces and move forward after catastrophic wildfires," Bennet said. "When mounting financial and emotional costs of recovery weigh on families, they should be able to take time to put their lives back together and rebuild their homes."
House members who represent Altadena, Pacific Palisades and Malibu in California introduced a companion bill this year that would provide 180 days of mortgage relief without penalties or late fees. The pause would apply only to federally backed loans.
Nonfederal lenders are not required to offer payment reprieves to homeowners in disaster zones. But after the Palisades and Eaton fires, more than 400 lenders agreed to a 90-day pause without reporting the missed payments to credit agencies.
Eaton Fire survivor Freddy Sayegh said he took advantage of the program after heavy smoke damage prevented him from returning to his Altadena home. He has since moved his family seven times and incurred thousands of dollars of unforeseen costs for food, clothing and other immediate needs.
Some of the costs were covered by insurance, but much of the money came out of his pocket while he awaits compensation.
He dipped into his savings when the 90 days were over and paid his delinquent mortgage in a lump sum, fearing he would incur fees or be forced to refinance.
"It actually placed a lot of pressure to come up with three months all at once," he said. "There's a lot of people who don't have three months of savings."
In Texas, where cataclysmic flooding that began July 2 caused an estimated $240 million in damage, officials announced a 90-day foreclosure moratorium that prohibits mortgage companies from initiating or completing foreclosures in Kerr County, the area hardest hit by the disaster.
According to the Mortgage Bankers Association, delinquencies nearly doubled nationally in March compared with the same time last year, up 21% from 12%.
In California, wildfire-related delinquencies peaked in March at 4,100 and fell to 2,240 in June, according to the data tracking company ICE Mortgage Technology.
The trend follows a pattern seen after other natural disasters, in which delinquencies spike in the months immediately following catastrophes and gradually level out over the next 18 to 24 months, said Andy Walden, head of mortgage and housing market research at Intercontinental Exchange, the parent company of ICE Mortgage Technology.
"It takes time for many homeowners to untangle finances while dealing with the emotional and logistical aftermath of losing their homes," he said. "From navigating insurance claims to working with FEMA, borrowers often need time to stabilize. Foreclosure moratoriums introduced after major disasters often give families the breathing room they need to recover."
Former Altadena resident Keni "Arts" Davis stared down at a 10-year mortgage when his home of nearly four decades was destroyed. He has moved six times since then, finally landing close to the neighborhood he loved so much.
Much of his recovery journey included negotiating with his insurance company to pay off his mortgage, rather than borrowing or seeking an extension.
"It might have meant financial ruin," he said.
He intends to rebuild by cobbling together the money through savings and microloans that are sometimes just $500. He said that the mortgage relief bills sound good on paper but that their timing leaves something to be desired.
"My grandmother would have said it's a day late and a dollar short," he said. "We're all just depending on any help we can get to make it one day to the next."