I lost my $1,700,000 home in the LA wildfire — what happens to my mortgage?

What happens to your mortgage?

According to Climate.gov, thousands of homes can be damaged or destroyed every year from weather and climate-related disasters, including wildfires, floods, tornadoes and hurricanes, causing widespread destruction and tens of billions of dollars in damages across the United States.

If your house is destroyed in a disaster — such as the Palisades or Eaton wildfires — you still have to pay your mortgage and a portion of your property tax.

However, the Consumer Financial Protection Bureau says mortgage lenders may offer mortgage forbearance programs, which allow you to temporarily pause or reduce your mortgage payment for a period of time.

In the case of the LA wildfires, California Governor Gavin Newsom says five major banks, the Bank of America, Citi, JPMorgan Chase, U.S. Bank and Wells Fargo, are providing mortgage relief to victims in designated areas.

“The lenders have committed to offering up to a 90-day grace period on mortgage payments, 90-day waiver of late fees, and 60- to 90-day moratorium on new foreclosures for property owners whose structures were damaged or destroyed by the LA firestorms,” Newsom’s press release said.

But, ultimately, mortgage balances are still owed — even if the house is gone.

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Steps to alleviate the financial pressure

A homeowner’s insurance policy is designed to cover the cost of repairing or rebuilding your home, as well as replacing personal belongings, such as furniture and electronics.

If you have a replacement cost policy (as opposed to an actual cash value policy), it may even reimburse you for your loss without accounting for depreciation — so be sure you understand what type of policy you pay for. It’s also important to check whether you have loss of use coverage to cover temporary housing if you can’t live in your home while it’s being rebuilt.

Keep in mind, though, that standard insurance policies don’t typically cover all natural disasters, such as flooding, earthquakes and tsunamis.

In California, “regulations require property insurers to immediately pay policyholders a minimum of one-third of the estimated value of their personal belongings and a minimum of four months’ worth of rent for the local area in which they live,” according to the Insurance Information Institute.

However, insurance may not cover everything, and it certainly can’t replace everything — especially sentimental items, like family heirlooms.

Despite the fact that California has the highest wildfire risk in the country — with expected annual losses estimated at $1.4 billion — nearly one in 10 (9.8%) of LA County homes are uninsured, according to an analysis of U.S. Census Bureau data. That’s because insurance in high-risk areas has become prohibitively expensive — or insurers have dropped coverage altogether.

For those who have insurance, filing a claim immediately and contacting your mortgage lender to see what your options are is a good idea. Whether you have coverage or not, applying for disaster assistance is worth your while.

Along with your mortgage, you may still have to pay a portion of your property taxes. Even if your house is gone, your land is still valuable — and, in Southern California, the land is often more valuable than the house that sits on it.

Residents who’ve lost their home can register for a reassessment of their property tax with the Misfortune and Calamity Tax Relief.

While we still don’t know the extent of the damage, AccuWeather estimates the fires will create an economic loss between $135 to $150 billion. So those filing an insurance claim can expect a long process ahead.