Newsom signs bill requiring lenders to pay homeowners interest on disaster insurance payouts

Governor Gavin Newsom has signed Assembly Bill 493, a new law aimed at ensuring that homeowners, rather than lenders, receive the interest accrued on insurance payouts following disasters such as wildfires. The legislation was enacted as part of ongoing efforts to support survivors of recent destructive fires in Los Angeles and other parts of California.

Previously, when insurance payments for damaged or lost property were held in escrow during reconstruction—a process that can last months or years—lenders could retain any interest generated by those funds. While state law already required lenders to pay homeowners interest on escrowed amounts for property taxes and insurance premiums, it did not extend this rule to hazard insurance payouts. The new law changes this by mandating that lenders pay homeowners the interest earned on these post-loss insurance funds.

“Homeowners rebuilding after a disaster need all the support they can get, including the interest earned on their insurance funds. I am proud to deliver this commonsense solution to ensure survivors receive every resource available to help them recover and rebuild,” Governor Newsom said.

Supporters say the measure addresses fairness by allowing homeowners access to all resources generated from their own insurance proceeds while they work toward recovery. The law is designed not to create additional burdens for lenders but instead brings rules for insurance payout escrows in line with existing regulations for other impound accounts.

The change is expected to provide added financial support for wildfire victims who are working to rebuild homes and communities across California. More information about ongoing rebuilding and recovery efforts following major fire events in Los Angeles is available through state resources.