Lenders may pay interest on held home insurance payouts directly to borrowers
Lenders holding home insurance payouts in a loss draft account during repairs still owe at least 2 percent interest, but may now pay it to the borrower directly instead of crediting the account. Uncashed interest checks are canceled after 90 days and credited back.
Who it affects
Mortgage lenders and owners of one- to four-unit homes
When
This law takes effect on January 1, 2027. California laws take effect on January 1 of the year after they are signed, unless the law says otherwise.
- : Signed into law
- : This law takes effect
Official text
California AB 1278: Mortgages: hazard insurance proceeds: interest.
On California Legislative Information. The official text is what counts; read it before you act.
Not legal advice. Plain-English summaries to help you find what changes and when. Not legal advice: read the official text, and ask a lawyer about your situation.