Mortgage forbearance: state of emergency: wildfire.
If passed, AB 238 will modify existing civil code to include specific provisions for mortgage servicers, requiring them to grant an initial forbearance of up to 90 days, with the possibility to extend it in increments of 90 days for a total of up to 12 months. During the forbearance period, servicers are prohibited from initiating any foreclosure proceedings or charging late fees. This significant change aims to alleviate financial stress on homeowners directly impacted by natural disasters, thus aiming to stabilize communities and prevent economic decline following such events.
Assembly Bill 238 pertains to mortgage forbearance during declared states of emergency due to wildfires. Specifically, it allows borrowers facing financial hardship as a result of the Eaton Wildfire, the Palisades Fire, and associated disasters to request forbearance on their residential mortgage loans. This forbearance request is limited to loans secured by residential properties with four or fewer units. The bill's intent is to provide temporary relief to those affected by such natural disasters, enabling them to delay their mortgage payments without incurring late fees or default interest during the forbearance period.
Overall, the sentiment surrounding AB 238 appears to be largely supportive, reflecting a recognition of the dire circumstances faced by those affected by wildfires. Lawmakers have shown a commitment to addressing urgent financial concerns of constituents in disaster-prone areas. However, there may be concern from some quarters regarding potential abuses of the forbearance system, as the bill requires borrowers to affirm financial hardship, which technically expands the definition of perjury in cases of false claims.
Key points of contention may arise from the bill's requirements for borrowers to affirm financial hardship and the expanded implications regarding perjury. Critics may argue that the bill could potentially complicate matters for honest borrowers facing difficulties, introducing a level of scrutiny that may deter eligible applicants. Additionally, the bill stipulates that if mortgage servicers deny forbearance requests, they must provide detailed justifications, which could create administrative burdens, particularly if the reasons are complex or subject to interpretation.