Banks operating in California are holding more than $1 billion in insurance claims paid to mortgage customers who lost their homes to wildfire. Regardless of how much these banks are earning on those funds, they are not paying a penny of interest to their customers. They are not allowing those customers to have those funds used to make their mortgage payments. The banks are holding all of those funds, even if they exceed the outstanding mortgage balance. And given the individual accounts limits on FDIC insurance, they are leaving their customers woefully unprotected on those holdings.
Given how long it takes homeowners to obtain permits and rebuild their homes here in Malibu, these funds will likely be held by the banks for many years–denying fire victims the opportunity to earn tens (if not hundreds) of thousands of dollars in interest earnings from safe investments such as FDIC-insured CDs.
That’s why we have asked State Senator Henry Stern to consider drafting legislation which will allow fire victims to invest their claim proceeds in such accounts, subject to liens by the mortgage holders. Otherwise, these banks stand to make windfall profits off the backs of all those who lost their homes. If you would support such legislation, please send your comments to Senator Stern at sd27.senate.ca.gov/contact and select “Bill Ideas and Legislative Requests.”
Scott Tallal