Newsom sponsors bill for wildfire-affected homeowners' insurance interest

California Governor Gavin Newsom has endorsed a new bill designed to ensure that homeowners affected by wildfires receive interest earned on their insurance payouts, rather than lenders. Authored by Assemblymember John Harabedian, the legislation addresses a gap in current law that allows lenders to keep interest from escrowed insurance funds. The bill aims to provide essential financial support for homeowners rebuilding after devastating fires in the Los Angeles region, where insurance payouts can remain in escrow for extended periods. While California law mandates lenders pay interest on escrowed property tax and insurance funds, it does not apply to insurance payouts, prompting the need for this legislative change. Proponents argue that the bill would help alleviate financial burdens faced by homeowners during recovery, with potential interest earnings amounting to about $20,000 annually on a $1 million payout. The legislation, expected to be introduced soon, aligns escrow rules for insurance payouts with those for other real estate expenses, ensuring fairness for disaster-impacted homeowners.