California launched a $105 million mortgage assistance program on June 12 geared toward homeowners whose homes were destroyed or left uninhabitable at the hands of a natural disaster, including the January wildfires in Los Angeles.

The CalAssist Mortgage Fund pledged to disperse grants to cover three months of mortgage payments to eligible applicants on a first come, first served basis with a cap of $20,000 per household. Spanning more than 30 disasters across the state dating back to January 2023 – including Tropical Storm Hilary, various winter storms and earthquakes, and several wildfires – the program can go toward future mortgage payments, paying off mortgage forbearance or catching up on a current mortgage, said Rebecca Franklin, chief deputy director of California Housing Finance Agency.

At a press conference in Altadena, Los Angeles County Supervisor Kathryn Barger called the program “a beacon of hope … (that) will bring much needed support to Altadena homeowners who are facing an immense financial strain.” She pointed out the alignment of this program with the ending of certain lenders’ mortgage forbearance periods.

The launch of the CalAssist Mortgage Fund also includes an additional $25 million in funding toward housing counseling support through CalHFA.

Franklin said the decision to include a range of disasters in the program boiled down to the amount of time it takes to recover from such devastation.

“When disasters like the devastating fires in the Southern California area happen, the rebuild takes years,” Franklin said. “We’ve learned that … and so the idea was that if a homeowner is currently still being affected by a disaster, then we should be there to help them just as much as if they’ve been recently affected.”

While David Smith, a professor of economics at Pepperdine University, believes the program could potentially benefit some folks affected by previous disasters, he said the majority of applicants will likely be those impacted by the Eaton and Palisades fires.

Daniel Berman, an attorney who lost his home in the Palisades fire, questioned the choice to include additional disasters and said “it might be too little too late” for those folks.

“To me, it seems to be very politically driven that in order to help one community, the state had to include some other communities to push this through and get the proper funding,” Berman said.

The grant money from the CalAssist Mortgage Fund comes from the National Mortgage Settlement Fund, which was created for California after the Great Recession. Following the Los Angeles wildfires this year, Franklin said CalHFA and the state decided to use what was left from that fund to create this program.

Breaking down the requirements

Caveats for qualifying include only owning one property, having had an up-to-date mortgage at the time the disaster occurred and not being in foreclosure.

Franklin said CalHFA made the up-to-date mortgage distinction to zero in on those trying to rebuild after disasters, adding that “other situations are cause for other efforts and other assistance programs.”

In examining this requirement and the first come, first served policy, Smith said he understands both from an administrative perspective but wished there could be additional considerations to address “the inherent inequities” in the structure.

“I am concerned that those who are perhaps less technology literate or who may be more vulnerable populations, such as the elderly or low income, those with disabilities… they may be disproportionately affected by this limitation, as it might take them longer to gather documents or complete applications,” Smith said.

Operating a lottery system of all eligible applicants is one possible avenue to address this concern, Smith said, also noting that “disasters often exacerbate existing vulnerabilities” and applicants who were not up to date on their mortgage before the disaster likely “need the help the most.”

Another requirement involves income which differs based on the location of the disaster. For Los Angeles County applicants, the combined income of everyone listed on a mortgage cannot exceed $140,700. This is a “reasonable balance to capture the middle class,” Smith said.

Those at CalHFA expect the program to reach 10,000 homeowners though Smith and Berman aren’t so sure.

Deeming this estimate “a little optimistic,” Smith said 7,500 may be a more accurate count, considering the cost of a typical mortgage in the Los Angeles area – where he expects most applicants to live – combined with the amount of funding available.

On the other hand, Berman – co-founder and executive chairman of Westwood law firm Wood Smith Henning & Berman – believes the income limit will create hurdles for both Altadena and Palisades homeowners to qualify in the first place.

In Altadena, the median annual household income was $129,123 in 2023, while the average household income was $177,894, according to Point2Homes. In the Palisades, this amounted to $191,836 and $351,895, respectively.

Getting guidance

For those who do qualify, Berman said: “It’s a start but… it’s not going to be the game changer that makes them decide to or have the ability to rebuild.”

At the press conference, Barger said this program is “only one of many that are going to be rolled out.”

What disaster survivors do need is answers to insurance questions and more guidance in navigating the entire rebuild process, Berman said.

Rodrigo Gonzalez, a commercial real estate executive who lost his home in the Eaton fire, identified the funding for counseling support within the CalAssist program as crucial for combatting all the uncertainty surrounding the recovery process.

“I think that the county and the city have made a lot of resources available, but a lot of people, including our neighbors, need guidance,” Gonzalez said. “They need a more structured, hand holding kind of rebuild relationship with someone that takes them from one step to the next, because it’s overwhelming and this is on top of their day-to-day work.”

Franklin pointed out that those who do not qualify for the mortgage program can be directed to additional programs by these counselors. Smith too expects this part of the program to be impactful in helping homeowners navigate rebuilding and recovery complexities. This includes insurance.

Insurance: past, present and future

Berman said he knows hundreds of people in the Palisades community who lost their homes and estimated that about 20% have resolved their insurance, but many are “completely at a standstill with insurance, whether they’re under-insured or they’re being offered low-ball numbers.”

Of those who have resolved their situation, about a quarter to a third are happy with the outcome, while the remaining “are still in a place of discontent” and unsure of where to go next, Berman said.

“What I’m hearing is that the numbers that are being offered for reconstruction are far below what it’s going to take based on what the contractors are charging on a square footage basis,” he said.

Gonzalez can attest to this, who said he is currently amid the final stages of settling with his insurance provider, working to align what he thinks his rebuild will cost versus what insurance thinks.

This uncertainty of rebuild costs is part of the delay with moving forward, Gonzalez said, calling it a “moving target.”

Having surveyed close to 30 contractors, Gonzalez said the estimates have varied significantly with some saying $300 per square foot and others saying $1,200 per square foot.

Aside from tackling current predicaments, Berman has serious concern over the future ability to obtain coverage and wants that to be a priority from state and local officials.

“The bigger concern of the people I talk to isn’t about how they can make their mortgage payment next month,” Berman said. “It’s, ‘if we are fortunate enough to rebuild, how are we going to be able to get insurance?’”

Smith, who previously worked in the insurance industry, is hopeful that insurance will be accessible with proper regulation and incentives from the government.

“It will be attainable … but there’s no getting around the fact that insurance will be more costly and so … anyone that lives within the state of California should understand that,” Smith said.

The amount of time people will have temporary relocation assistance from insurance providers will also play a role in how long they can stay afloat while awaiting progress, Gonzalez said.

Reestablishing community

While the vast majority of Palisades and Altadena fire victims would like to rebuild their homes in their communities, 70% of Palisades homeowners and 63% of Eaton area homeowners said they may not return if the process takes longer than three years, according to a survey by the Urban Land Institute.

No matter what, Berman plans to rebuild his Palisades home – a westside community he first moved to when he was 5.

“It’s really the only neighborhood, the only community I’ve ever known,” Berman said.

Shortly before the January fire, Berman and his wife moved out of the home to make way for a remodel project. Having already gone through the approval process for the remodel over the last few years, Berman expects a permit approval to rebuild earlier than some of his neighbors who are starting from scratch.

“We’d like to be one of the first homes in the neighborhood to be built and hopefully be a representative of light for the community,” Berman said.

For those who are not ahead of the curve on project plans, the ability to move forward quickly through the permitting process remains a challenge. As of Thursday, the county had reported 30 permits issued for rebuilding in the Eaton fire zone and one in the Palisades.

A lot of the decision to return comes down to circumstance, Gonzalez said. The fact that he and his wife have one child in elementary school and another in middle school plays a major role in shaping his perspective.

“If we do a custom rebuild and we’re back in three years, our son will be in high school at that point, and that changes the dynamic,” Gonzalez said. “That no longer becomes his childhood home.”

On the other hand, if they decide to go with a template rebuild with a shorter timeline, Gonzalez has concerns about being the first one on the block.

“Do I want to have my children around construction for the next few years or empty lots for that matter?” Gonzalez said. “We have to live with our decision both literally and figuratively.”