Under a new Senate bill, survivors of natural disasters would be eligible for six months of mortgage relief without accumulating interest or penalties if they have federally backed loans.
The Mortgage Relief for Disaster Survivors Act was introduced Thursday by Sens. Adam Schiff of California and Michael Bennet of Colorado, both Democrats whose states have been devastated by wildfires in recent years.
The measure would apply to homeowners in areas declared disasters since Jan. 1. Borrowers could apply for six-month extensions after the initial six-month time period expires.
“Earlier this year, we watched as families in Los Angeles were devastated by wildfires, and to date, many homeowners are still struggling to rebuild from this disaster,” Schiff said in a statement.
“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,” he added.
When a fire ripped through Altadena in January, parts of Schiff’s former congressional district were among the nearly 6,000 homes that were destroyed. At least 19 people were killed in the blaze.
A wildfire ravaged Bennet’s state of Colorado in 2021, damaging or destroying about 1,200 homes in Boulder County.
“Coloradans know all too well how difficult it is to pick up the pieces and move forward after catastrophic wildfires,” Bennet said in a statement. “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.”
House members from California who represent Altadena, Pacific Palisades, and Malibu reportedly introduced a similar measure in the lower chamber earlier this year that would pause mortgage payments for those affected by natural disasters for six months without incurring penalties or late fees. As in the Senate bill, only federally backed loans would be eligible.
While private lenders are not required to give payment reprieves to homeowners affected by natural disasters, more than 400 lenders agreed to pause payments for 90 days without reporting to the credit bureaus after the wildfires.
National delinquencies nearly doubled in March, compared with the same time last year, climbing from 12% to 21%, according to the Mortgage Bankers Association.
Wildfire-related delinquencies in California hit 4,100 in March and dropped to 2,240 in June, the data tracking company ICE Mortgage Technology found.
Andy Walden, head of mortgage and housing market research at ICE Mortgage Technology’s parent company, Intercontinental Exchange, told NBC News that delinquencies surge in the months immediately following disasters and level out over 18 to 24 months.
“It takes time for many homeowners to untangle finances while dealing with the emotional and logistical aftermath of losing their homes,” Walden said. “From navigating insurance claims to working with FEMA [the Federal Emergency Management Agency], borrowers often need time to stabilize. Foreclosure moratoriums introduced after major disasters often give families the breathing room they need to recover.”
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