In the wake of Southern California’s devastating January 2025 wildfires, Sacramento has begun to pen a bill which would provide mortgage assistance to those financially impacted. Assembly Bill 238 is titled the “Mortgage Deferment Act” and would provide a temporary relief period for mortgage payments. Its purpose is to provide relief to borrowers through forbearance, which is a temporary pause on payments. Its title is confusing because “deferment” is actually a completely different concept.

Importantly, it is not yet law. It was introduced on January 13, 2025, and will undergo further reads and likely re-writes prior to a hearing.

As currently written, homeowners need only attest to their financial hardship—no burdensome documentation required—to secure up to 180 days of mortgage forbearance. Should circumstances warrant, an additional 180-day extension is also possible.

The legislation prohibits the assessment of additional fees, penalties, or interest beyond scheduled amounts. It requires an immediate stay of foreclosure efforts, which has minimal weight considering that foreclosures often drag for many months if not years and can only begin once a borrower is 3 months in default. This moratorium also extends to all aspects of the foreclosure process, and includes a foreclosure related-eviction.

The implications for California’s homeowners are profound. Consider a family in the path of the Palisades Fire: their home may stand untouched, yet their livelihood might be severely impacted by the broader economic ripples of the disaster. Under AB 238, they need not navigate a labyrinth of paperwork to secure temporary relief. A simple attestation opens the door to meaningful assistance.

However, it’s crucial to note that this is not debt forgiveness—rather, it’s a breathing space. Most traditional forbearance plans require a lump sum payment at the end of the period. This would include all amounts which came due during the forbearance period. Contrast this with a traditional “deferment” concept where the unpaid amounts are due at loan maturity.

Under AB 238, mortgage servicers maintain an obligation to ensure borrowers understand that these payments must eventually be repaid, and the current language suggests flexibility regarding repayment but this will likely change.
For specific guidance on tracking or implementation of these protections, we stand ready to assist.