California regulators are investigating whether lenders improperly delayed insurance payments to Los Angeles wildfire survivors, bringing scrutiny to a funding problem that can complicate borrowers’ plans to rebuild.
The Business and Consumer Services Agency and Department of Financial Protection and Innovation announced the inquiry Oct. 15, following more than 160 complaints about insurance disbursements since January 2025.
According to the state announcement, regulators are examining delayed payments, access to timely appeals, and instances in which insurance money allegedly remained with a lender after the loan was fully repaid.
Recovery remains underway more than 20 months after the January 2025 fires. Last month, the governor’s office reported that local building departments had issued 8,450 permits across the Los Angeles fire recovery effort. In Malibu, the city announced that it had issued its 100th reconstruction permit and the first certificate of occupancy for a home rebuilt after the Palisades Fire — illustrating the distance between permission to build and a homeowner’s return.
“We will not hesitate to take strong action against an institution that has needlessly delayed payments or broken our laws,” DFPI Commissioner KC Mohseni said.
Financial institutions must explain the proceeds received, amounts released, disbursement timing, and reasons for funds still withheld as of Sept. 30.
The Rebuilding Finance Gap
For originators helping disaster survivors, the investigation highlights a practical issue: an insurance settlement and cash available to fund construction can be different amounts at different points in the rebuilding process.
A borrower’s financing plan should account for the existing loan balance, proceeds already available, conditions governing further releases, and any remaining construction funding need. Originators can help assemble that picture with the borrower and servicer before presenting financing options.
The inquiry also extends California’s attention beyond getting claims paid to examining how financial institutions handle the money afterward. For lenders, that puts disbursement records and explanations for retaining funds at the center of the review.
A Financing Option For Eligible Survivors
Separately, CalHFA’s $100 million Disaster Rebuilding Assistance Program offers tools intended to expand access to construction financing.
Participating lenders can seek reimbursement for eligible lender-funded temporary and permanent construction-loan rate buydowns. The program also offers coverage for eligible realized lender losses on qualifying construction or renovation loans.
CalHFA began accepting reservations Sept. 16. The program covers qualifying disasters declared during a specified period from Jan. 1, 2023, through Jan. 8, 2025, and construction lenders must receive agency approval to participate.
Homeowners must meet borrower and property requirements, including income eligibility and primary-residence conditions.
Those tools address financing access, while the investigation addresses access to insurance proceeds. Originators assessing a rebuilding file should establish what money the borrower can use, when it can be drawn, and what additional debt the completed plan would require.
