When disaster strikes, banks step up for California wildfire victims

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OPINION – California’s wildfire season has become an unfortunate hallmark of modern life—an annual reminder of how quickly communities can be uprooted and how fragile day-to-day stability can be. Each year, families across the state confront the devastation of losing homes, treasured belongings, livelihoods, and any sense of normalcy. The Los Angeles wildfires from January were no exception. Entire neighborhoods were displaced, infrastructure was strained, and thousands of homeowners suddenly faced a terrifying question: How do we keep our homes when everything else has been taken from us?

In the midst of this uncertainty, the banking community stepped forward with decisive action to offer immediate relief and protect homeowners from cascading financial harm. California banks mobilized quickly, offering 90-day mortgage forbearance, waiving late fees, pausing foreclosure proceedings, and taking steps to shield customers from negative credit-score impacts. These measures may appear technical, but for families sifting through ashes—trying to locate rental housing, replace essential items, or simply regroup—such relief can mean the difference between temporary hardship and long-term financial ruin.

More than 420 California financial institutions extended voluntary 90-day relief, ensuring that support reached individuals impacted by the Los Angeles wildfires. This broad participation demonstrates a deep recognition within the financial sector: in times of disaster, stability in housing is a cornerstone of recovery.

Importantly, Fannie Mae and Freddie Mac, known as Government-Sponsored Enterprises (GSEs), authorized mortgage servicers to allow up to 12 months of mortgage forbearance for impacted borrowers. The GSEs are essential partners in disaster response because a substantial portion of existing mortgages in the United States are owned by the federal government and are tied to investor guidelines that mortgage servicers must follow. Without federal directives permitting forbearance, pausing foreclosures, or modifying repayment structures, mortgage servicers would be constrained in extending relief—even when they want to. Federal alignment is critical in unlocking the flexibility needed to quickly deploy relief, making their participation indispensable.

The California Bankers Association worked collaboratively with legislators on Assembly Bill 238, the Mortgage Forbearance Act, which codified important protections for wildfire victims, guaranteeing up to one year of forbearance and prohibiting practices such as late fees and negative credit reporting during the relief period. That bill also acknowledges a structural reality often overlooked in public discussions: mortgage servicers must operate within the margins of their contractual servicing agreements. By recognizing the difference between investor-owned vs portfolio loans that remain on the lender’s balance sheet, lawmakers signaled a pragmatic and collaborative approach—one that encourages relief while respecting the operational boundaries within which the mortgage industry must function.

Taken together, the response to the Los Angeles wildfires reflects a broader truth about disaster recovery: collaboration matters. When banks, regulators, lawmakers, and federal agencies work in tandem, the effect is powerful. Relief becomes more consistent, more widely available, and more closely aligned with the real-world needs of displaced families. For homeowners, these actions translate into more than financial accommodations—they represent hope, dignity, and the assurance that they will not be forced to weather a crisis alone.

As climate change accelerates and extreme weather events grow more frequent, California must prepare for a future in which disaster-response systems are activated more often and with greater urgency. The coordinated approach seen after the recent wildfires offers a strong model for the future—one rooted in partnership, responsiveness, and the shared understanding that protecting housing stability is essential to community resilience.

By Jason Lane, Senior Vice President, Director of Government Relations for the California Bankers Association.