California officials ordered mortgage lenders, including banks and credit unions, to report this week on how they have handled insurance payouts owed to survivors of the 2025 Palisades and Eaton fires, giving the institutions just two weeks to respond. The order comes as rebuilding across fire-scarred neighborhoods of Los Angeles remains painfully slow, with homeowners still battling to unlock money that is sitting in escrow.
The directive, reported Thursday by click2houston.com, comes from the California Business and Consumer Services Agency and the state's Department of Financial Protection and Innovation, which are trying to speed up the release of insurance proceeds that lenders hold before passing them along to homeowners. The agencies say the state's Department of Financial Protection and Innovation has received more than 160 complaints about payment delays or other issues since January 2025. A separate account from the Los Angeles Times put that complaint count at more than 120 as of July, and the discrepancy between the two figures has not been explained.
The scale of what's at stake is enormous. The Palisades and Eaton fires destroyed more than 16,000 homes and other structures in residential areas in and around Los Angeles, according to the same report from click2houston.com, though NBC News has separately put the death toll at 31 and the number of destroyed homes and residential properties at about 13,000 — a difference in figures the available reporting does not explain.
Lenders Accused Of Sitting On Rebuilding Funds
Typically, lenders release insurance funds in installments as construction progresses, a system designed to protect both the bank's collateral and the homeowner's rebuild. But that process isn't playing out as designed for many fire survivors, according to local and state officials cited by the Los Angeles Times. The newspaper's reporting describes mortgage lenders delaying and denying access to insurance funds held in escrow, leaving families who were finally ready to rebuild instead stuck waiting.
Gov. Gavin Newsom moved on this in July, writing to bankers' associations and credit unions after fire victims reported that lenders sometimes held payouts for weeks before releasing them. He ordered the state to begin collecting data on lenders that take longer than 10 days to distribute insurance proceeds and fail to develop a plan to speed up payouts, according to the same click2houston.com report. Newsom has said survivors should not face unnecessary red tape, delays, or barriers to relief, and that the state is taking action to support families and business owners trying to rebuild.
New State Law Requires Interest On Held Funds
California enacted a law in 2025 requiring banks and credit unions to pay homeowners interest on insurance payments the institutions hold onto. The law requires financial institutions to pay at least 2% of the interest earned on held hazard insurance proceeds.
DFPI Commissioner KC Mohseni said the department may fine banks and credit unions that unnecessarily delay insurance payouts, adding that lenders should not impede homeowners and families as they rebuild and recover. Newsom also pushed a plan during his final legislative session requiring home insurers to bear more wildfire costs, though California lawmakers failed to agree on a solution to that broader wildfire-cost proposal.
Rebuilding Still Crawling A Year-Plus Later
The human toll of these delays shows up starkly in the rebuilding numbers. Fewer than a dozen homes had been rebuilt in Los Angeles County a year after the fires, according to NBC News, even as about 900 homes were under construction and potentially on pace for completion later this year. More than 600 properties where a single-family home was destroyed had already been sold, per Cotality data cited in the same report, and less than 20% of people who suffered a total home loss had closed out their insurance claims by December 2025.
For comparison, a December 2021 wildfire south of Boulder, Colorado, destroyed more than 1,000 homes — a disaster NBC News noted while tracking the slower pace in Los Angeles.
California also rolled out a financing program last month aimed at closing the gap between insurance payouts and the actual cost of rebuilding for Eaton and Palisades survivors. The program, first announced during Newsom's State of the State address earlier this year, was developed in response to feedback from fire survivors, according to a statement posted to the governor's official website.
