LOS ANGELES, CA – California regulators on Thursday ordered licensed mortgage lenders and servicers to report how they have handled insurance payouts for survivors of the January 2025 Eaton and Palisades fires, following complaints that money needed for rebuilding was delayed or withheld, according to the state Department of Financial Protection and Innovation.
The Department of Financial Protection and Innovation, known as DFPI, and the California Business and Consumer Services Agency issued the order Thursday, Oct. 15, according to a DFPI news release. It requires financial institutions to report on how they handle the disbursement of insurance payouts to Los Angeles-area fire survivors.
The mandatory report covers the size and distribution of the proceeds each institution received, whether all of the funds were disbursed, how long disbursements took and the reasons for any delays or withheld amounts. The figures are to be reported as of Sept. 30, 2026.
Responses are due Oct. 29. The order went to about 800 licensed lenders and servicers.
DFPI said it has received more than 160 confidential consumer complaints since January 2025.
Investigation covers three areas
The investigation looks at delayed payments, the lack of a timely appeal process and the holding of funds after a loan has been paid off. Those three areas are the ones DFPI identified in announcing the order.
The data request is limited to loans within the Eaton and Palisades fire perimeters. Among other items, it asks each institution for the number of borrowers for whom it received insurance proceeds after the fires and how often it held proceeds longer than 10 days.
California has hundreds of licensed home lenders. They include large national banks, online lenders, regional and community banks and credit unions.
Chopra and Mohseni criticize delays
Business and Consumer Services Secretary Rohit Chopra said it is unacceptable that some survivors still do not have access to the funds they need to rebuild. He said the state will hold firms accountable for failures that impede survivors’ access to money they are owed.
DFPI Commissioner KC Mohseni said survivors should not have to wait while institutions drag their feet. He said the department will not hesitate to take strong action against an institution that has needlessly delayed payments or broken the law, which could include fines, according to initial reports.
How payouts on mortgaged homes are released
Insurance payouts for mortgaged homes damaged or destroyed by fire are typically not sent directly to the homeowner. Instead, the lender or servicer holds the money and releases it in stages, known as tranches, as the home is rebuilt or repaired.
The Governor’s Office described the arrangement in a February 2025 announcement. It said: “After a disaster, insurance payouts are held in escrow until rebuilding is complete, which can take months or even years.”
That announcement, dated Feb. 10, 2025, introduced legislation to give homeowners the interest earned on escrowed payouts. At the time, state law required interest on escrowed property taxes and insurance premiums, but not on insurance payouts held in escrow.
Newsom warned banking groups in July
Gov. Gavin Newsom sent a letter July 14 to banking and lending associations, warning against unnecessary delays in releasing insurance funds held in escrow, according to the Governor’s Office.
The Governor’s Office statement said: “The last thing survivors need is unnecessary red tape, delays, and barriers standing between them and the relief they deserve.” The letter directed the Business and Consumer Services Agency and DFPI to collect complaints and data on delayed or denied access to funds.
According to initial reports, the letter asked for data on institutions that failed to release proceeds within 10 business days, failed to set up an expedited appeals process or held proceeds above the outstanding loan balance. It also noted that some survivors had waited more than a month for their money.
State officials also said that CAL FIRE’s damage inspection classifications are not a basis for denying insurance claims.
More than 11,000 homes severely damaged or destroyed
The Governor’s Office said that across Los Angeles County, “over 11,000 single-family homes and 13,000 housing units were severely damaged or destroyed, with thousands more affected by smoke damage.” The Eaton fire burned in Altadena and nearby communities, and the Palisades fire burned in Pacific Palisades.
After the fires, survivors in those communities complained that reconstruction work was being held up by delays in getting insurance proceeds from their lenders and servicers. The state’s order is a response to those complaints.
Los Angeles County Recovery publishes a Permitting Progress Dashboard on its rebuilding page. The dashboard tracks permit applications and review times for the Eaton and Palisades fire areas.
AB 493 requires interest on escrowed payouts
Newsom signed AB 493 on Aug. 29, 2025. The bill was authored by Assemblymember Chris Harabedian, and the Governor’s Office said it requires lenders to pay interest on post-loss insurance payouts held in escrow.
The office said: “The new law explicitly requires lenders to pay homeowners the interest earned on post-loss insurance payouts, just as they do for other escrowed property expenses.”
The law guarantees at least 2% annual interest. It took effect immediately through an emergency clause.
Survivor advocate points to interest owed
Joy Chen, executive director of the Every Fire Survivor’s Network, said that every day lenders wait to pay, they collect interest that belongs to survivors. Her statement is the position of an advocacy group.
The investigation announced Thursday focuses on the timing and handling of disbursements. DFPI’s release does not describe findings about any institution.
Industry groups say they will work with regulators
Paul Gigliotti, chief executive of the California Mortgage Bankers Association, said in a statement that the group is reaching out to mortgage servicers to make sure they know the rules on insurance proceeds. He said the association is encouraging servicers to review their staffing, inspection practices, disbursement timelines and appeal processes.
Gigliotti said servicers and survivors share the goal of getting homes rebuilt, and that completing construction allows families to move forward with their lives.
The California Credit Union League issued a statement saying credit unions share the goal of ensuring fire survivors receive timely and fair access to their insurance proceeds. It said credit unions remain committed to working with their members and community partners to help survivors recover and rebuild.
Responses are due Oct. 29
Lenders and servicers have until Oct. 29 to submit the data to the state. DFPI said its investigation is ongoing.
Whether any institution faces enforcement action will depend on what the reports show and on DFPI’s review of the complaints. The department has not announced any action against a specific lender or servicer.
