Senators propose natural-disaster mortgage relief bill

Lawmakers from two wildfire-stricken states put forth a new Senate bill that would mandate mortgage relief for homeowners in the aftermath of natural disasters. 

Sens. Adam Schiff, D-Calif. and Michael Bennet, D-Colo. introduced the Mortgage Relief for Disaster Survivors Act this week aimed at alleviating homeowners' financial hardship after an extreme weather event. The bill would make mortgage-payment forbearance available in any area designated as a disaster zone by the president, state governors or tribal leaders.   

If enacted, affected mortgage borrowers would receive 180 days of forbearance, with no accumulation of interest fees nor penalties. An option to extend the initial period by another 180 days would also be offered. 

The bill covers any climate-related natural disaster occurring since Jan. 1, making victims of the deadly Southern California wildfires this year eligible. Then-President Joe Biden declared Los Angeles County a disaster area in the days after fires began to engulf many residential neighborhoods. 

"As natural disasters become more frequent due to climate change, it is critical that we pave a path to stability for homeowners in times of crisis. This is an issue that impacts both red and blue states alike, and I'll push hard to ensure Congress passes this legislation," said Senator Schiff, who previously represented one of the congressional districts hardest hit by the fires. 

"Coloradans know all too well how difficult it is to pick up the pieces and move forward after catastrophic wildfires. When mounting financial and emotional costs of recovery weigh on families, they should be able to take time to put their lives back together and rebuild their homes," added. Sen. Bennet.

Two Democratic members of the House of Representatives from Schiff's home state, Judy Chu and Brad Sherman, are proposing a companion bill in the lower chamber. 

Several consumer groups also came out to support the new Senate legislation. 

"After a natural disaster, survivors often have many extra expenses for temporary relocation and basic needs, and may also be facing job loss or medical bills. This bill will ensure that disaster survivors can begin rebuilding their lives before they are required to resume making mortgage payments if they are unable to do so at the outset," said Alys Cohen, director of federal housing advocacy at the National Consumer Law Center, in a statement.

"Just as importantly, it sets clear, uniform standards for servicers across the country, so homeowners get the same fair treatment no matter where they live," added Sharon Cornelissen, director of housing at the Consumer Federation of America. 

Other California wildfire relief initiatives

The bill's terms closely resemble similar initiatives introduced to protect Southern California homeowners in the weeks after the wildfires flared. 

In January, California state assemblymember John Harabedian, D-Pasadena, put forward legislation that would grant a minimum of 180 days of forbearance to the wildfire victims. Prior to the bill being introduced Gov. Gavin Newsom also announced he had reached an agreement with several mortgage lenders, including five of the largest U.S. banks, on a 90-day forbearance period for affected customers, whose loans were serviced by those institutions. 

An investigation earlier this summer by the nonprofit news outlet LAist, whose results were confirmed by California regulators, indicated that some servicers were not complying with terms of the plans they voluntarily agreed to follow. 

In the months since the wildfires, Gov. Newsom also issued other emergency declarations for several counties in Northern California impacted by storms and flooding. 

Current relief policies after natural disasters

After a federal major disaster declaration is issued by the president, a 90-day foreclosure moratorium is immediately put in place to protect homeowners residing in the designated zones who have mortgages guaranteed by the Federal Housing Administration and U.S. Department of Agriculture. Such protections were put in place last month after floods devastated parts of Texas, as well as after several storms hit several Central U.S. states earlier this year. 

FHA also makes available reconstruction financing to impacted borrowers whose properties require complete replacement. 

Fannie Mae and Freddie Mac guidelines advise residential mortgage borrowers with loans backed by the enterprises to contact their servicers, who may be able to grant up to one year of payment forbearance. Servicers are also prohibited from foreclosing on properties for 90 days after a weather incident when they suspect a home has been hit by a disaster and no contact has been made with the owner.