California regulators have ordered the state's licensed mortgage lenders and servicers to report how they handled insurance payouts for the Eaton and Palisades fires, which destroyed more than 11,000 single-family homes. The order targets delays in releasing money that insurers have already paid, with responses due October 29.
The order, issued October 15 by the Business and Consumer Services Agency and the Department of Financial Protection and Innovation, requires lenders to report as of September 30 on the size and distribution of insurance proceeds they received for property loss, personal property and living expenses. They must explain whether all funds were disbursed, how long disbursement took and the reasons for any delays or withheld money.
Letters went to about 800 lenders and servicers, and the data requested includes the number of borrowers for whom they received proceeds and how often they held funds longer than 10 days.
Regulators are investigating whether lenders delayed payments to survivors, failed to provide a timely appeal process for decisions on releasing funds, or held insurance money after a loan was fully paid. Firms may face enforcement under state and federal consumer protection laws. The department has received more than 160 confidential consumer complaints since January 2025.
California Business and Consumer Services Secretary Rohit Chopra said it is unacceptable that survivors still lack funds "after running through a gauntlet of paperwork to file insurance claims."
The order follows letters Gov. Gavin Newsom sent on July 14 to the California Mortgage Bankers Association, the California Bankers Association and California's credit unions, noting that some survivors waited more than a month for proceeds. He asked the agencies to collect data on lenders that failed to release proceeds within 10 business days, lacked an expedited appeals process or held proceeds above the outstanding loan balance. A separate law, AB 493, signed in August 2025, requires lenders holding insurance proceeds during rebuilding to pay homeowners at least 2% simple annual interest.
California Mortgage Bankers Association CEO Paul Gigliotti said the group is contacting servicers and "encouraging them to review their staffing, inspection practices, disbursement timelines, and appeal processes." The California Credit Union League and the California Bankers Association also issued statements committing to timely access for survivors.
The order is aimed at lenders, not insurers, who face separate scrutiny: Los Angeles County sued State Farm on August 31 over its handling of fire claims. For agents and brokers with California clients whose fire losses are mortgaged, the benchmarks in Newsom's letter are release within 10 business days, an expedited appeals process and no proceeds held beyond the outstanding loan balance.
