Fire survivors were finally ready to rebuild. A new barrier is leaving them ‘demoralized’

More than a year after the Eaton fire devastated their community, returning to their beloved Altadena neighborhood finally seemed within reach for Baba Singh and his family.

They had secured their insurance payout, gotten rebuilding plans approved and hired a contractor.

But then their mortgage company started withholding the couple’s insurance money it held in escrow — allocated specifically for the rebuild. The inaccessible cash continues to threaten their family’s ability to continue construction.

“We’re literally being denied money that doesn’t belong to them,” Singh said of his mortgage company. “It’s just so demoralizing at this point.”

The frustrating situation comes on top of mounting financial strain and housing instability for many fire survivors who are trying to rebuild their homes and lives after the 2025 firestorms. Local and state officials worry the mortgage payout delays could further stymie what’s become an already slow recovery.

This week, Gov. Gavin Newsom called on mortgage companies to better support fire victims, calling “survivors’ ability to access the insurance coverage they’ve paid for … foundational to recovery.”

“I am concerned that too many financial institutions are not providing fair and fast access to insurance proceeds,” Newsom wrote in a letter to associations representing California banks, credit unions and mortgage lenders. “The state has received dozens of reports of servicers holding funds in excess of the unpaid principal balance in clear violation of federal guidelines.”

Under most mortgage agreements, lenders have the authority to administer a home’s insurance payout, a process that is supposed to ensure the funds are used to restore the value of the property — of which the lender has a vested financial interest.

Typically lenders release installments of the insurance funds as construction progresses. But both local and state officials say the process isn’t playing out as it’s set up.

Newsom said “too many fire survivors are reporting that lenders and servicers are adding unnecessary red tape and excessively withholding funds.” Many residents also pointed out that the longer these financial firms hold on to the cash, the more interest they can earn on the funds.

“It’s one of those things where people are like, ‘What do you mean nobody’s addressed this?’” said Demetrius Gray, public insurance adjuster who has taken on dozens of pro-bono cases from the Eaton and Palisades fires. “People have widely reported on insurance companies [shortfalls]. … But this mortgage issue is the issue.”

Newsom said he’s directed the state’s Department of Financial Protection and Innovation “to resolve consumer complaints about lenders holding excess funds,” and urged homeowners to file a complaint online so the state can better track and respond to such issues. The department told The Times it has already received more than 120 complaints.

But some who have gone through that process, including Singh, haven’t found the results fruitful, though they reported that the department did put some additional pressure on lenders.

Many in this position are finding there are few consequences for lenders that delay or deny disbursements, forcing fire survivors to try to adhere to lenders’ complicated rules and appeals processes — all while costs mount.

Paul Gigliotti, the chief executive of the California Mortgage Bankers Assn., said his organization is taking these concerns seriously, but provided few specifics on solutions.

“We are in direct communication with members, encouraging them to review their policies, staffing, inspection practices, borrower communications, disbursement timelines and determination processes, and escalation procedures,” Gigliotti said in a statement. “We understand and appreciate the need to ensure requests are handled as efficiently, consistently and transparently as possible.”

Though a flurry of legislation has been passed to aid fire survivors — including a new law that requires financial institutions to pay homeowners at least 2% of the interest earned on insurance payouts held in escrow — nothing has directly addressed how mortgage companies should disperse insurance money, Gray said.

“There are no rules around this … and the advantage is all theirs,” Gray said of mortgage lenders. “It literally is the Wild West.”

California Business and Consumer Services Secretary Rohit Chopra said that state officials are focused on tracking financial firms that fail to make fair and timely payments, so officials can then consider “enforcement under state and federal consumer protection laws.” A spokesperson for the Department of Financial Protection and Innovation also pointed out that the California Residential Mortgage Law Act prohibits a mortgage lender from engaging in “unfair, unlawful, and deceptive business acts,” and if one is found in violation, the department could issue an order to stop or seek discipline against the lender license. But so far, the department has only “directly addressed [complaints] with the lender,” the spokesperson said.

But Gray said those pathways have little teeth, particularly after the Consumer Financial Protection Bureau has been gutted under the Trump administration. He said mortgage companies withholding insurance funds has become an issue across the nation after disasters.

Assemblymember John Harabedian (D-Pasadena), who represents Altadena and sponsored the bill that now requires mortgage lenders to share their earned interest from these withheld funds, applauded Newsom’s focus on this issue but acknowledged that “more must be done.”

These lenders “have a responsibility to be responsive, communicate clearly, and guarantee that the rebuilding process is not slowed by unnecessary administrative barriers,” Harabedian said. I “look forward to working with [Newsom] to ensure accountability.”

Several families trying to rebuild told The Times that their mortgage lenders continue to provide them misleading requirements and little clarity for how and when they will disperse their insurance funds, often giving only vague denials, delays and constantly changing benchmarks.

“I’ve contacted every regulatory agency I can think of,” said Singh, a clinical psychologist. “We’re stuck. … But then again, none of us in west Altadena have expected much help from anyone in charge in California since the night of the fire, when they didn’t even bother to warn us our town was burning.”

Still, after raising several alarms — including filing complaints with the state’s Department of Financial Protection and Innovation, connecting with Better Business Bureaus in different states and even reaching out to The Times — Singh said his mortgage company did decide last week to disperse a new tranche of cash, about $62,000, and then promised another one soon. It was enough to keep their construction going — for now.

At this point in their construction, the couple’s lender, Onity Mortgage, is now withholding only about $75,000 of their insurance payout, but Singh called it an amount that remains crucial for them. Until they use up all their insurance money, they can’t access their federal Small Business Administration loan, another batch of funding they need to get to the finish line. Like many fire survivors, he found out they were woefully underinsured after the disaster.

But Onity hasn’t yet provided a clear process for when it will release the last of Singh’s funds. He’s been told their house needs to be 75% or 80% completed, but he doesn’t know how they can get to that point without that cash — even if the company was assessing their progress properly.

“It’s frustrating because it’s our money!” said Marcy Harbut, Singh’s wife. “Why do they have any say?

In a statement, Onity Mortgage declined to discuss specifics of the couple’s case, but said it has been “actively working” with Singh.

“As is standard practice, insurance proceeds for properties with mortgage liens are released in stages based on the progress of repairs and the results of property inspections designed to verify completed work and protect all parties involved,” Onity spokesperson Derek Cuculich said in a statement. “We remain committed to helping facilitate the timely disbursement of insurance proceeds as requirements are met.”

Other families in Altadena and the Palisades have run into similar issues with lenders holding the funds they need, many describing arbitrary progress reports, confusing requirements and, in one case, a refusal to release funds because the planned rebuild is smaller than the initially mortgaged home.

Richard Shoop is among them, but he’s been determined to find a way to make it work. His mortgage lender has provided him several different rebuild benchmarks he must hit before he can receive any insurance money.

First it was 33% built. Then it was 37%. Another time it was 46.99%, he said.

He estimates his home is well over 50% completed now, but the company hasn’t acknowledged that.

“They have not released any rebuild funds,” Shoop said. “I started paying out of pocket to get this thing going. … I’m getting ready to send a letter to the attorney general.”

He’s hoping that state officials will actually step in and step up soon, because despite his determination, he’s not sure how much longer he can fund the project on his own.

“We need the money, as everyone does,” Shoop said. “This is terrible.”

Singh and his wife have already borrowed thousands from family members to keep the rebuild on schedule and spent hours on the phone with their mortgage company. Now they’re considering tapping into their retirement savings.

“We’re exhausted and we want to go home,” Singh said.