California’s New Mortgage Forbearance Law Create Breathing Room After Disaster

Wildfires devastate entire neighborhoods in California every year, leaving families without homes but still facing monthly mortgage bills. The issue lawmakers tackled this fall was straightforward: what happens to mortgage payments when the home itself has been destroyed?

The rule is Assembly Bill 238, the Mortgage Forbearance Act, signed into law immediately as an urgency measure. It gives eligible homeowners an initial 90-day pause on mortgage payments, with the right to extend in 90-day increments for up to a year. Lenders must respond promptly to requests, explain denials, and allow borrowers to cure and reapply. Servicers must also provide clear notice about how to extend forbearance.

A homeowner is eligible under AB 238 if they are an individual borrower (or successor / power of attorney) of an owner-occupied residential property (1–4 units), with a mortgage secured by that property, and if they suffer financial hardship due to the January 2025 wildfires / disaster, as attested, and their property is in the affected zone or otherwise tied to the disaster. During forbearance, foreclosure actions are barred, and no additional fees or interest may accrue beyond scheduled amounts.

The analysis is easy to imagine. Picture a family standing in front of the ashes of their house when the next mortgage bill arrives. Without legal protection, foreclosure could come before rebuilding even begins. With this law, families get breathing room, while lenders retain their rights in the long term. Importantly, the law also ensures that trustee’s sales remain valid even if servicers fail to comply, protecting market stability.

The conclusion is that California now guarantees disaster victims a safety net against immediate foreclosure.

For real estate consumers, this matters because disasters don’t just damage homes; they shake entire markets. Knowing that protections exist helps buyers, sellers, and communities recover with confidence.