The short answer: On October 15, 2026, California ordered mortgage lenders and servicers to report how they've handled insurance payouts to Eaton and Palisades fire survivors, with reports due October 29. If your lender is holding your dwelling insurance money while you rebuild, a 2025 state law (AB 493) requires it to pay you at least 2% simple interest a year on those funds. Money for contents and living expenses generally shouldn't be held at all, and if you believe your lender is delaying funds without good reason, you can file a confidential complaint with the Department of Financial Protection and Innovation.
As of October 29, 2026. This is general information, not legal advice. Your loan documents and your loan's investor (Fannie Mae, Freddie Mac, FHA, VA or a private lender) set the specific rules.
What did California order lenders to do?
On October 15, the California Business and Consumer Services Agency and the Department of Financial Protection and Innovation (DFPI) ordered financial institutions to report how they've handled insurance payouts to survivors of the January 2025 Eaton and Palisades fires (BCSA, October 15, 2026). The reports must show the size and distribution of insurance proceeds they received, including for personal property and living expenses, plus written explanations of whether all funds went to survivors, how long disbursements took and why any money was delayed or withheld. The data is as of September 30, 2026.
The state says it's checking whether lenders delayed payments, failed to offer a timely appeal of their fund-release decisions, or held insurance money after a loan was paid off, and that firms may face enforcement under state and federal consumer protection laws. DFPI has received more than 160 confidential complaints about disbursement delays since January 2025. Trade press reported that the order went to about 800 lenders and servicers and that the deadline is today, October 29 (Mortgage Professional America, October 16, 2026).
Why is my mortgage company holding my insurance check in the first place?
Because your lender is named on your homeowners policy. A standard deed of trust requires the policy to list the lender as mortgagee, and it lets the lender hold the dwelling (structure) proceeds and pay them out in one payment or in stages as repairs progress, so the house that secures the loan actually gets rebuilt (Buchalter, February 11, 2025). The money usually sits in what's called a loss draft account.
That's the rule for the structure. Checks for contents and additional living expenses are different. Fannie Mae, for example, tells servicers to issue the borrower a check immediately for proceeds designated for contents or living expenses (Fannie Mae Servicing Guide B-5-01). If your lender's name is on one of those checks, ask it to endorse the check back to you.
How fast should my lender release the money?
It depends on who owns your loan and whether your payments are current. As one example, here's how Fannie Mae's servicing rules handle dwelling proceeds:
How Fannie Mae servicers release dwelling insurance proceeds
| Loan current or under 31 days late | Loan 31+ days late | |
|---|---|---|
| First release | Greatest of $40,000, 33% of proceeds, or any amount above the loan payoff | 25% of proceeds, capped at the greater of $10,000 or any amount above the payoff |
| Remaining funds | Released after periodic inspections of repair progress | No more than 25% at a time, after inspections |
| Final inspection required? | No not required | Yes |
| Contents and living expenses | Paid to you immediately | Paid to you immediately |
Fannie Mae's guide doesn't set a firm deadline for releasing most dwelling funds, which is part of why the state is stepping in. In his July letter to lender associations, Governor Newsom pointed to benchmarks such as releasing proceeds within 10 business days, offering an expedited appeal for disputed disbursements and not holding funds above the outstanding loan balance, according to trade press coverage of the order (Mortgage Professional America).
Am I earning interest on money my lender is holding?
Yes, under California law. AB 493 (Harabedian), signed and effective immediately on August 29, 2025, added Civil Code section 2954.85. It requires lenders on California one-to-four-unit homes, including banks, credit unions and non-bank lenders, to pay at least 2% simple interest per year on hazard insurance proceeds held in a loss draft account while you rebuild or repair. Interest is credited at least once a year or when the account closes, and the lender can't charge a fee that would cut your return below 2%. For money already being held when the law took effect, interest started accruing on that date (AB 493, Chapter 103, Statutes of 2025). There's a narrow exception for proceeds a regulator requires a non-bank lender to keep in a non-interest-bearing trust account.
Check your loss draft statements for that interest. If you don't see it, ask your servicer in writing how it's being calculated and credited.
What should I do if my lender is slow-walking my funds?
Getting your insurance money moving
- 1
This week
Get the facts in writing
- Ask your servicer's loss draft department for the balance held, the interest credited and its release schedule
- Ask who owns your loan (Fannie Mae, Freddie Mac, FHA, VA or a private lender)
- 2
Before the next draw
Make the next release easy to approve
- Send the signed contractor agreement, bids and permits they ask for
- Schedule the inspection as soon as each stage of work is done
- 3
If you're stuck
Escalate
- Ask in writing for a supervisor and the lender's appeal process for a denied or delayed release
- File a confidential complaint at dfpi.ca.gov/submit-a-complaint
Keep copies of everything, and note the date and name of everyone you speak with. If your lender keeps asking for the same documents, a written log is what makes a complaint effective.
Does it matter if I rebuild somewhere else or sell?
It can. California Insurance Code section 2051.5 lets you rebuild at a new location or buy an existing home elsewhere after a total loss, and your insurer can't deny replacement-cost or code-upgrade benefits because of that choice, although it won't pay more than rebuilding at the original site would have cost. In a declared state of emergency, you also have at least 36 months from the first actual cash value payment to collect full replacement cost, and living-expense coverage runs for 36 months (California Department of Insurance).
Your lender's position is separate. Under the standard deed of trust, if you don't rebuild, the lender can apply dwelling proceeds to your loan balance, and Fannie Mae requires that for properties that can't legally be rebuilt. If you're selling a fire lot or rebuilding elsewhere, talk with your servicer early about how the held funds and your payoff will be handled. If you're in the Palisades and thinking about selling, my piece on Prop TE and Palisades fire homeowners covers what's on the November 3 ballot.
Reading from outside California? AB 493's 2% interest rule and the state's reporting order are California-only. Fannie Mae's disbursement rules apply to Fannie Mae loans nationwide.
Derek\'s take
Nearly two years after the fires, many families in Altadena and the Palisades are still waiting on insurance money that's sitting in a lender's account, and that delay can hold up an entire rebuild. The good news is that you have more leverage than you might think: a state law that pays you interest, investor rules that spell out how money should be released, and a regulator that's now collecting the data. If you're rebuilding, thinking about a construction loan or weighing whether to sell the lot, I'm happy to look at where you stand and help you ask your servicer the right questions. Book a call with me: thirty minutes, no credit pull, no obligation.
Frequently asked questions
Can my mortgage lender hold my fire insurance money?
Yes, for the dwelling portion. Your deed of trust usually lets the lender hold structure proceeds and release them as repairs progress. Money for contents and living expenses generally should go to you right away.
Does my lender have to pay me interest on held insurance proceeds in California?
Yes. Under Civil Code section 2954.85 (AB 493, effective August 29, 2025), lenders must pay at least 2% simple interest per year on hazard insurance proceeds held in a loss draft account while you rebuild or repair.
What did California order lenders to report in October 2026?
On October 15, 2026, BCSA and DFPI ordered financial institutions to report the insurance proceeds they received for Eaton and Palisades fire survivors, whether and how quickly the money was paid out, and why any funds were delayed or withheld, using data as of September 30, 2026.
How do I file a complaint about my mortgage servicer in California?
You can submit a confidential complaint to the Department of Financial Protection and Innovation at dfpi.ca.gov/submit-a-complaint. Include your loan number, your dates and amounts, and copies of your correspondence.
How long do I have to rebuild and still collect full replacement cost?
For a loss in a declared state of emergency, California law gives you at least 36 months from the first actual cash value payment to collect full replacement cost. Your policy may give you more.
This article is general education, not legal or financial advice, and not an offer of credit. Rules vary by loan type, investor and policy; check your own documents or talk with an attorney about your situation.
Sources
- California Business and Consumer Services Agency, "California orders financial institutions to report data on insurance payouts to LA fires survivors" (October 15, 2026)
- Mortgage Professional America, "California lenders ordered to account for wildfire insurance payouts" (October 16, 2026)
- AB 493 (Harabedian), Chapter 103, Statutes of 2025, adding Civil Code section 2954.85
- Fannie Mae Servicing Guide B-5-01, Insured Loss Events
- California Department of Insurance, Important California laws that pertain to property insurance policies after a declared disaster
- Buchalter, "California Wildfires: Residential Mortgage Servicing and Property Insurance Proceeds" (February 11, 2025)
- DFPI, Submit a complaint
This article is general education, not a commitment to lend, an offer of credit, or tax, legal or investment advice. All loans are subject to credit approval, income and asset verification, and property appraisal. Programs, rates, terms and limits change without notice; figures are current as of the publish date. Derek Shao, NMLS #242117, CA DRE #01358261. Financial Dynamics, Inc. DBA Emory Financial, Company NMLS #393986. Equal Housing Opportunity.
