Property insurance notice of cancellation.

Assembly Member Harabedian's mortgage lending reform legislation responds to devastating January 2025 wildfires in Los Angeles and Ventura counties by requiring financial institutions to pay interest on insurance proceeds held in escrow accounts. The measure amends California's existing requirements for interest payments on property tax and insurance escrow accounts to explicitly include insurance payouts following property damage or loss.

For loans executed after January 1, 2026, lenders must pay borrowers at least 2% annual interest on all escrowed funds, including insurance proceeds. The bill creates a targeted exception for properties in Los Angeles and Ventura counties damaged by the January 2025 wildfires - these homeowners would receive interest on insurance payouts even if their loans predate 2026. Financial institutions cannot impose fees that would reduce the effective interest rate below 2%.

The legislation's findings document the scale of the disaster, noting that multiple wildfires burned over 47,900 acres and damaged or destroyed more than 16,250 structures across greater Los Angeles. While the interest requirement applies prospectively to avoid disrupting existing contracts, the bill's authors assert that immediate application to wildfire-impacted properties serves a compelling state interest in supporting disaster recovery and maintaining housing stability.