Senate Standing Committee on Banking and Financial Institutions

The Senate Committee on Banking and Financial Institutions will come to order. We have two bills on today's agenda, both from Assembly Member Harabedian. These are two very, very important bills motivated by financial challenges that homeowners are facing due to the LA wildfires.

And if I may, at the start of this hearing, I want to state my deep, deep appreciation and respect for the author and how he has pushed forward these bills. In a sense, I would also like to express my gratitude for the collaborative spirit that industry stakeholders brought to the table.

These bills are really great examples of how hard work and collaboration can result in what we like around here, and that's good policy making, at least in this Committee. So with that, let's establish... We don't have a quorum, so we'll start as a subcommittee and we'll get things moving. And we have up Assembly Member Harabedian. You may present on your bill, AB 238.

Thank you, Mr. Chair. Let me just echo the comments and right back at this Committee and the Chair and the staff for being so collaborative and for pushing this with such urgency and allowing us to be here. I know that I am the only presenting Member here with my own two bills, and that is not lost on me. I appreciate you guys taking the time and the Chair for taking the time to hear these bills. And that is very much appreciated by me and all the Members who are affected in my district and the Pacific Palisades.

Member, would you allow us to establish a quorum? All right. Thank you. Assistant, will you please call roll?

[Roll Call]

A quorum has been established and you may continue, sir.

Thank you. Thank you, Mr. Chair. For those in Altadena and the Pacific Palisades, the LA wildfires are the worst disaster we could have imagined. Many survivors have lost everything and now they face an overwhelming challenge, which is rebuilding their lives and their homes from the ground up.

Without immediate financial relief, the burden of continued mortgage payments could trigger the worst, which is a wave of foreclosures, deepening instability for our communities, and just more loss. And we are trying to avoid that. In AB 238, the Mortgage Forbearance Act, provides a vital safety net and a uniform process for relief. This bill is pretty simple.

It would give wildfire survivors the option to temporarily pause their mortgage payments for up to a year, and during that time they would not receive any penalties. No foreclosure, no damage to their credit report, and without any balloon payments at the end of that foreclosure period. The need for this bill is undeniable.

We hear from folks every day who are dealing with their financial institutions in good faith, and we've heard harrowing stories. Borrowers being harassed, forbearance guidelines deliberately being obscured, threats of credit damage, and demands for unaffordable balloon payments at the end of foreclosure, which folks can't afford.

We've worked closely with the stakeholders. And I want to again echo the Chair by thanking the stakeholders for ensuring that borrowers are protected from harm while holding lenders and and servicers accountable without breaking any contractual agreements. Due to that work, this bill has no formal opposition.

It also has many supporters, including a diverse coalition including the County Board of Supervisors in LA County, SEIU, the California Apartment Association, California Professional Firefighters, and many more. Senators, these fires have changed my district forever, and I think that this bill gives some solace and some comfort for those still reeling. I respectfully ask for your aye vote.

Thank you, Assembly Member. And I don't believe we have any registered witnesses in support or in opposition. We will go to the audience. For those that want to add on in support, simply state your name, affiliation, and position.

Thank you, Mr. Chair. Adam Keigwin on behalf of the California Charter Schools Association in support.

Sarah Brennan with the Weideman Group on behalf of SEIU State Council in support.

Emmerald Evans with End Child Poverty California. And also on behalf of Shimica Gaskins, who is an impacted Altadena resident, Courage California, Friends Committee on Legislation of California, Parents Voices California, and End Child Poverty in California in strong support of AB 238. Thank you.

Good afternoon. Silvia Solis Shaw here on behalf of the City of Los Angeles in support, and also on behalf of Los Angeles City Attorney Hydee Feldstein Soto, also in support. Thank you.

Good afternoon, Mr. Chair and Members. Cesar Diaz on behalf of LA County in support.

Thank you so much. Any members in the audience in opposition? Step forward. Seeing none. We'd like to bring it back to Committee for questions or... Oh, we have tweeners. All right. On the bubble.

Hi. Thank you, Mr. Chair and Members. My name is Vanessa Lugo, and I'm with the California Bankers Association. We're pleased to have been working with Assembly Member Harabedian on this bill, as it reflects our negotiations today. As the bill moves through the Senate, we do have a couple remaining compliance related tightening and look forward to working with the author as the bill moves through. Thank you.

Mr. Chair and Members. Randy Pollack on behalf of the Consumer Data Industry Association. I just want to echo Vanessa's words. We want to give a lot of appreciation to the Assemblyman, his staff, Sage, and also the Committee for helping us work through some amendments to help make sure that what we're setting up here could be information properly reported to the credit reporting, so we know exactly what to do with that information. Thank you.

Thank you so very much. Now that we I think covered almost everybody in the audience, we can bring it back to Committee. And we have multiple people moving the bill. All right. We do have a motion to move the bill. Assembly Member, would you like to close?

Respectfully ask for an aye vote. Thank you.

Excellent close. Thank you so much. Assistant, this is do pass and re-refer to Committee on Judiciary. Assistant, please call roll.

Assembly Bill 238. Motion is do passed to Senate Judiciary. [Roll Call] We have four.

Your bill has four votes. We will place it on call. And we will now move promptly over to your next bill, AB 493. You may present when you're ready.

Once again, I'd like to thank the chair and the Committee staff for all their work on this critical Bill. Under current law in California, lenders are required to pay interest on certain types of funds that are held in escrow. And that's certain things like property tax.

When you set those aside in an escrow account, you get interest as an individual on that escrow account. However, recent court decisions in California have ruled that post loss insurance payouts, like when someone's home burns down or they are damaged, are excluded from this requirement, allowing lenders to retain interest on those escrowed funds rather than the homeowner.

That is a problem. It hurts Californians and particularly those recently impacted by the wildfires in Los Angeles but throughout the state, in any disaster or wildfire.

Assembly Bill 493 seeks to support and protect homeowners by eliminating the exemption on post-loss insurance payouts, making sure that homeowners receive at least 2% interest on their insurance payouts so that they can rebuild their lives.

This is significant amounts of money when you're talking about hundreds of thousands, if not millions of dollars that will be held in escrow for weeks, months, if not longer by banks.

We recently amended the Bill so that AB 493 now applies to all loans regardless of when they are issued for post loss Insurance payments made on or after January 1, 2026. For properties impacted by the Los Angeles wildfires, the Bill also covers payments made in 2025 - here's the key part - as long as those funds are still being held in escrow. So if payments have already been made, that would not apply to those accounts.

I'd like to thank Governor Newsom for his partnership on this critical Bill and just you know my view of this, AB 493 really restores a basic principle that money held in trust for homeowners should benefit them and not financial institutions. This Bill is no opposition and has received bipartisan support. I respectfully ask for your aye vote.

Thank you so very much Assemblymember and again, I don't believe we have registered lead witnesses for opposition or for support or opposition. But we do have Members in the audience that would like to state their name, organization and position.

Thank you Mr. Chair and Members. Cesar Diaz on behalf of the County of Los Angeles in support.

Good afternoon. Sean Bellach on behalf of the California Association of Realtors in proud support. Thank you.

Indira McDonald on behalf of the California Mortgage Bankers Association and just want to thank the author.

There are some concerns that we initially had and the amendments and the analysis as you are taking do address the concerns related to the Residential Mortgage Lending Act and just adding conformity so that mortgage banks can hold the funds in deposit, you know, accounts that hold interest. Thank you.

Any others in support? Any in opposition? Any in any other position? Seeing none, we'll bring it back to Committee for questions or comments. We do have a motion to move the Bill. Assemblymember would you like to close?

Thank you Mr. Chair. Thank you Senators for all your work. Respectfully ask for an aye vote. Thank you.

Thank you so very much. This is AB 493. Do pass and re-refer to Committee on Judiciary. Assistant, please call roll.

[ROLL CALL]

Your Bill has four votes. We'll place it on call. Thank you so very much Mr. Chairman. Congratulations. We will we will continue to hold Committee open for just a few more minutes for absent Members to come and add on. Give us just a few minutes. Assistant we will lift call on AB 238 for absent Members.

[Roll Call]

The Bill has six votes. We'll continue to keep it on call. And AB 493.

[Roll Call]

Very good. Bill has six votes. We'll continue to keep it on call. Thank you very much.

We'll stay stay tuned for just a few more minutes.

Secretary, please lift call on AB 238 for absent Members.

[Roll Call]

The Bill has seven votes and is out of Committee. Secretary, please lift the call on AB 493.

[Roll Call]

The Bill has seven votes and is out of Committee. This finishes up our business in the Banking Committee and the Committee is adjourned.