LOS ANGELES — As part of the state’s continued efforts to support Los Angeles firestorm survivors, Governor Newsom signed into law Assembly Bill 493 (Harabedian) to ensure homeowners, not lenders, benefit from the interest earned on insurance payouts, particularly those impacted by California’s most destructive wildfires.

The legislation signed on Aug 29 corrects an inequity that allows lenders to keep interest accrued on insurance payouts held in escrow after a disaster.

After a disaster, insurance payouts are often held in escrow while construction is ongoing, which can take months or even years.

While California law requires lenders to pay homeowners interest on escrowed funds for property taxes and insurance premiums, it previously did not extend this requirement to hazard insurance payouts held in escrow. The new law explicitly requires lenders to pay homeowners the interest earned on post-loss insurance payouts, just as they do for other escrowed property expenses.