On September 22, the governor of California signed into law AB 238, the Mortgage Forbearance Act, to provide relief to homeowners affected by several January 2025 wildfires. The Act authorizes borrowers to request forbearance on residential mortgage loans. Under the statute, mortgage servicers must offer an initial 90-day forbearance period, which borrowers may extend in 90-day increments up to a maximum of 12 months. Importantly, the Act stipulates that with respect to federally backed loans, no person shall be held liable for violations of the statute if compliance would conflict with servicing guidelines issued by federal agencies or government-sponsored entities.

The Mortgage Forbearance Act prohibits mortgage servicers from assessing late fees or charging a default rate of interest during the forbearance period. Mortgage servicers must disclose repayment requirements to borrowers at the start of forbearance, and lump-sum repayment cannot be required for borrowers who were current before forbearance. Servicers are also barred from initiating foreclosure processes, moving for a foreclosure judgment or order of sale, or executing foreclosure-related evictions or sales while the borrower executes the terms of forbearance. Additionally, the Act requires servicers to report credit obligations in compliance with the FCRA and ensures that borrowers are not penalized for accessing forbearance relief. Lastly, the Act also mandates that the California DFPI provide information and resources about disaster-related forbearance on its website. The Mortgage Forbearance Act took effect immediately upon signing.