LA residents whose homes burnt down in wildfires will still have to pay off mortgages, property taxes

As deadly wildfires continue scorching their way through Los Angeles and the surrounding area for the second straight week, homeowners are worried about the prospect of defaulting on their mortgages in the wake of the unprecedented disaster were offered some reprieve from the nation’s major lenders.

On Monday, Fannie Mae and Freddie Mac unveiled mortgage assistance and relief options for customers reeling from the historic Southern California fires.

Both government-backed corporations are offering 12-month forbearance plans, meaning that struggling homeowners could either reduce or suspend their mortgage payments for up to a year without incurring late fees, foreclosure, or other types of legal proceedings.

In cases where a homeowner has failed to reach out to their lender, mortgage servicers are authorized to offer a forbearance plan for up to three months if they believe the home was affected by a disaster.

“We are committed to supporting homeowners, renters, and communities in need during this challenging time,” said Cyndi Danko, Fannie Mae’s single-family senior vice president and chief credit officer, in a statement. “If homeowners have been impacted by the fires, we encourage them to call their mortgage servicer for assistance as soon as possible.”

Even after the forbearance period ends, homeowners can apply for a repayment plan, a payment deferral, or a loan modification to avoid mortgage delinquency, according to the companies.

“The number one priority for those affected by the destruction of these ongoing wildfires is to reach safety,” stated Mike Reynolds, Freddie Mac’s single-family vice president and head of servicing. “Freddie Mac and our partners stand ready to provide immediate assistance and aid in the recovery of families and individuals.”

Mortgage delinquency can have disastrous financial consequences, including mounting late fees, a drop in the borrower’s credit score, and home foreclosure.

Homeowners are encouraged to contact their mortgage servicers, or reach out to Fannie Mae and Freddie Mac by phone or on their websites, to find out how to apply for assistance.

Private lenders offer relief

Some private lenders have followed in Fannie Mae and Freddie Mac’s footsteps in extending help to those affected by the calamity unfolding on the West Coast.

Chase Home Lending, a division of JPMorgan Chase, is offering a three-month forbearance program, which can be extended in three-month increments for up to 12 months. However, borrowers have an option to extend the relief window beyond the one-year mark.

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Bank of America also said it has a program in place that includes mortgage forbearance options tailored to its customers’ needs.

Separately, Wells Fargo pledged $1.3 million from its foundation to support wildfire relief efforts, a company spokesperson said on Monday.

No escaping property taxes, mortgage payments

The bad news is that wildfire victims whose homes were heavily damaged or even reduced to ashes are still on the hook for mortgage payments and property taxes.

In some cases, lenders fold property taxes into borrowers’ monthly mortgage payments.

Under this arrangement, the client pays one-twelfth of their annual property tax bill along with their mortgage payment, according to Experian.com.

That amount is deposited into an escrow account, which is then used by the lender to pay the property taxes to the county on their clients’ behalf by the due date.

While the value of a home might be significantly reduced, or even nullified, depending on the extent of the damage, the land on which the house had been built might still be worth a lot of money, especially in high-priced areas like Pacific Palisades and Malibu, according to Los Angeles County Tax Assessor Jeff Prang speaking to KTLA this week.

Prang said his office would slash the assessment and taxes on the property but not on the land.

If the home is later rebuilt, it could potentially regain its prefire value, but that would depend on such factors as the real estate market and the quality of the repairs.

The good news is that homeowners whose properties have sustained more than $10,000 in damages could qualify for tax relief if they file a Misfortune or Calamity Relief claim within 12 months of the incident through Prang’s office.

Dangerous winds threaten LA

Meanwhile, the wildfires continued raging in and around LA on Thursday, driven by dangerous Santa Ana winds.

So far, the infernos have killed at least 25 people, singed more than 40,600 acres and annihilated upward of 12,300 structures, among them countless homes, according to Cal Fire. 

The Palisades Fire, the most destructive of the blazes which annihilated the star-studded coastal community of Pacific Palisades last week, was 19% contained, while the Eaton Fire burning outside Pasadena, CA, was 45% contained.

Los Angeles County Sheriff Robert Luna has warned that the death toll could go up, considering that close to 30 people are still missing.

Just under 90,000 residents in the area remained under evacuation orders, half the number from last week.

Gusty winds of up to 65 mph in some areas threatened to spread flames quicker and carry embers miles away, potentially hampering emergency crews’ efforts to put out the blazes.

The National Weather Service has issued a rare “Particularly Dangerous Situation” alert for parts of Los Angeles and Ventura counties through Wednesday afternoon.

However, the winds are expected to finally die down Thursday, offering the 22,000 firefighters battling the apocalyptic infernos a welcome reprieve.

“This is really just the last push of these winds here today,” National Weather Service meteorologist Todd Hall said. “Hopefully, if we get through today we’re gonna have some better conditions for late week, especially into Friday and Saturday.”