The shortfall between what homeowners who lost homes in the wildfires are receiving from insurance providers and what it’s expected to cost to rebuild is upwards of $5 billion collectively, according to research from Bank of America and the Urban Land Institute.

Between the two fires, this comes out to more than $1 billion total in Altadena, or $300,000 per home, and more than $4 billion in Pacific Palisades, or $900,000 per home. Thus, on average, Altadena residents will have about 75% of their rebuild covered by insurance compared to 69% in Palisades. These calculations assumed a rebuild cost of $600 per square foot in Altadena and $1,000 in Palisades.

Aside from developers and contractors working to lower the costs of rebuilding – which several groups are successfully doing – Raul Anaya, president of Bank of America for Greater Los Angeles, said his team is working on tackling the “liquidity crunch” in
a couple of ways. Noting that the state-mandated mortgage forbearance period for wildfire victims will end in January, Anaya also pointed out that insurance coverage for temporary relocation housing will also come to an end.

In a June survey from Department of Angels, a nonprofit designed to support wildfire victims, found that 60% of the 2,000 surveyed reported that their temporary housing coverage would expire by summer 2026.

“The liquidity crunch is coming up,” Anaya said. “Families are going to have to start resuming payments on the underlying mortgage of a home that no longer exists, as well as coverage from the insurance company ending for the place where they’re living today.”

To combat that, the bank is finalizing regulatory approval to extend its mortgage forbearance to January 2027, as well as launching a new rebuild line of credit product. This credit line will allow customers to retain the original interest rate of their underlying mortgage when continuing payments on their rebuilt homes. And it will only be available for those who already had their mortgage established with Bank of America. Anaya said that accounts for about 1,000 of the homes that burned.

‘Systemic issue’

Even still, the long-term impacts of the fires’ disruption to the insurance market remain a colossal concern as well as the disparities among carriers, said Miguel Santana, president and chief executive of the California Community Foundation. Through his work with the Department of Angels, a component fund of CCF’s Initiatives Fund, Santana found the organization’s survey results to be quite revealing. Of those enrolled in California FAIR Plan, the state’s last resort insurer, 93% reported a negative experience along with 82% of State Farm customers.

“When you’re going through it as an individual, you think it’s just you, but then when you aggregate all the experiences of 2,000 survivors, you start seeing a real pattern of behavior and that really becomes a systemic issue,” Santana said.

Part of pushing back stems from strength in numbers. Santana pointed to “a very strong coalition of survivors… (who) have been walking the halls of Sacramento, meeting with legislators…to (ensure) survivors receive the payoffs that they’re entitled to.”

Additionally, Santana said he and CCF have been pushing for insurance companies to pay for environmental testing across burn areas and for the federal government to provide a substantial appropriation for the rebuilding of infrastructure. Deeming the wildfires “a canary in the coal mine” that is the state of insurance in California, Santana said as climate change worsens, more Californians will be forced to enroll in the FAIR Plan out of necessity which will not end well.

“We need to start dealing with this issue for the long term, because it’s simply not sustainable,” Santana said. “…You can’t deal with the housing crisis if you don’t fix the insurance crisis.”