If you lost your home in a wildfire, what happens to your mortgage?

Welcome back. David Lazarus joining us now. Laz, you have been getting a ton of questions from people who lost their homes about what happens with their mortgages and their taxes. And are they still on the hook for all that? Yeah, and there's a lot of moving parts to this. It is, of course, a very fluid story. Let's get back to the mortgages in just a moment. First, let's talk about what's going to happen to property taxes if your home is significantly damaged or destroyed. I spoke earlier with L.A. County Tax Assessor Jeff Prang. Here's what he said. We're going to reduce your assessment and your property taxes for damaged or destroyed property. There is a program, it is called Misfortune and Calamity, that requires me to reduce the assessed value of your property to reflect the damage or the destruction. If your home is completely burned to the ground, we're going to value the home at zero. Now, when Assessor Prang is talking about property in this case, he's talking about the structure, your home, your garage, any other outlying structures that are there. He's not talking about the underlying land underneath. What happens with that? Unfortunately, this reduction doesn't apply to the land, but it will affect your property. We're going to be doing this proactively, but I also want to encourage everybody to file the Misfortune and Calamity form online This is a very tricky business because the Assessor told me that his office has looked at the assessed values on an average basis in the fire-hit areas, and it turns out roughly two-thirds of the assessed value of these properties is the land and not the structure, which means all of those properties in the Pacific Palisades, for example, or Malibu, they're still going to be taxed at a very, very high level. And let's take a look at Prop 13. Let's say you've been in your house for decades, and you've enjoyed decades of Prop 13 protections when it comes to your property taxes. If your house is destroyed, if you rebuild, do you still get the Prop 13 protections? Here's what Prang said. You will still have your pre-damaged Prop 13 protections, so your tax base will be restored to what it was before the fire. And you can build up to 120% of what was there before without reassessment. That's a very interesting thing, because what he's saying is if you rebuild to 100% of what you had before, in other words, pretty much the same house, your property tax doesn't change. But also, you can do 20% more in the form of upgrades. Let's say some wood floors or something like that. As long as you don't go over 20% beyond the previous assessed value, you're good, and your property taxes aren't going to change. If you go above that 120% threshold, you're not really going to be in totally hot water, but those extra overages that we're talking about, those will add to your tax burden, but won't take it into an entirely market-based area. And now let's talk about mortgages. A number of viewers have been asking me, do I still have to pay my mortgage if my house burns down? And I've got bad news for you. Yes, you do. A deal is a deal. Think of it like this. You finance a new car, you drive off the lot, the next day it gets stolen, you're still on the hook for your financing payments. It's the same thing with the mortgage. However, I'm happy to say that forbearance, which is basically a fancy way of saying deferred payments, is possible from your mortgage servicer, not necessarily the bank from which you got your initial loan, but the servicer that's now handling the loan. Contact them if you're in this situation, and work out some schedule whereby you can defer payments for hopefully months, if not years, until down the road. But ultimately, you will have to pay for that loan. Something we brought up earlier today, too, with this forbearance, say they freeze it and you don't have to pay your mortgage payment, you said the interest keeps accruing. It does indeed. The mortgage, in fact, the terms of the loan do not change. So forbearance means you're just going to put it off for a little while. You are not rewriting the terms of the loan. So at the end of the day, you will get bit financially. And again, a deal is a deal, and so that's the problem. But I wouldn't be surprised, considering the scope of the problem here, if a number of mortgage servicers or financial firms don't come to some sort of terms on this kind of thing because thousands and thousands of families are going to be unable to deal with this financial hit in the coming years. I mean, there's so many different angles we could talk about with you. And we will. Talking about rental, same with rental properties. Okay, so you're lucky enough to rebuild your house. You've got to live somewhere. You need to rent a house. You rent a house, but we're seeing already people are jacking up the prices on rental properties. And remember, there are price gouging laws. Rental properties cannot go up more than 10% within 30 days of an emergency. So what we've been seeing is some properties that might have been off the market in recent months have suddenly come back, and that's not a price gouge. That's somebody just trying to get to the market value, and supply and demand says there's a lot of demand out there. I've seen a lot of that on Zillow, where these houses are like, wait, what, that's, oh, maybe it's a second home. And they're like, oh, well, let's put it up for rent. $10,500 in area. And keep in mind when we have an influx, a huge influx of laborers to help deal with the rebuilding, where are they going to stay? And at what price? These are questions we'll have to address in days and weeks ahead.