A $125 million state-backed mortgage relief program aims to stabilize housing for affected homeowners, but the fund may offer only temporary relief
It's only been two months since wildfires devastated LA, displacing many and destroying over 16,000 homes. In response to this catastrophe, California Gov. Gavin Newsom proposed a $125 million mortgage relief program aimed at assisting homeowners whose properties were destroyed or severely damaged by recent natural disasters, including these wildfires.
Announced in February, the program seeks to prevent foreclosures among affected homeowners by providing direct mortgage relief and extending counseling services to aid in their recovery. Funding for this initiative is sourced from settlements California secured from major banks during the mortgage crisis, ensuring it does not impact the state's existing budget.
Much of the money is intended to assist in mortgage aid to those who lost their homes in the fires.
“It sounds like a lot of money, but in those areas, it’s going to go by pretty fast,” said Rey Reyes (pictured), CEO and senior loan officer at WeLoan USA.
In regions like Pacific Palisades, where land alone can sell for upwards of $3 million, even a sizable relief fund is unlikely to stretch far. However, Reyes noted that other, less wealthy, communities are the main targets of the relief.
“People think that everyone there is just loaded with money, and this is not the case,” Reyes said. “As long as it helps with covering the rent, covering the mortgage, covering just the basic necessities, I think it’s a good idea.”
The relief initiative isn’t operating in isolation, either. Reyes emphasized that the $125 million is in addition to ongoing donations and support from insurance companies, although he’s very aware about the mounting challenges homeowners face - especially when it comes to insurance.
Since the fires, insurance rates in California have ballooned. Ten years ago, insurance might have been $50 to $75 per month, today it's $500 to $1,000, Reyes said.
“I have a client who is selling his house; he pays $3,400 a year in homeowners' insurance. The person buying his house is going to pay $12,000 for the same property,” he said.
These increasing costs are creating ripple effects impacting affordability. The destruction of thousands of homes intensified an already competitive rental market, leading to increased rental prices and exacerbating affordability issues.
This surge in demand prompted concerns about price gouging, with reports of illegal rent increases surfacing despite state laws prohibiting such practices during emergencies.
“It’s going to get harder to afford the house, because now you have to be stuck with the higher interest, higher homeowners' insurance premium, which is going to make it harder for some people to qualify,” Reyes said.
During this uncertain time Reyes focuses on grounding his clients in what they can afford today—rather than banking on a future that may not materialize. Reyes doesn’t make promises about refinancing timelines.
“I never tell anybody they can refinance in three, four or five months because sometimes that's not the case. It could be one to two years,” Reyes said.
Hesitancy to refinance has come during this period. Reyes sees clients able to refinance who instead want to wait for rates to drop. That mentality, he warned, can backfire.
“Let’s make a comparison. As long as you’re getting a refinance at zero to very little cost, take advantage of it,” he said.
The goal, he explained, isn’t to slash monthly payments, but to restructure the loan to work harder. That way, even if rates drop further in a year, clients have chipped away at their loan balance—and are in a better position when refinancing becomes more attractive.
“Let me help you structure where you keep your same payment, we drop the rate, but now more of your money is going to the principal balance,” Reyes said. “You definitely don’t want to just wait around for the perfect market. Right now, it’s too volatile, and it’s just very unexpected.”
