The Coming Financial Cliff for L.A. Fire Survivors: Avoiding the Liquidity Crunch
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Nearly a year after the Eaton and Palisades fires, Los Angeles is still in the thick of recovery. What’s stood out from day one is how collaborative this work has been across sectors. Survivors, nonprofits, civic, foundation and business leaders are sharing data, testing ideas and leveraging each other’s resources in real time.
That spirit is the only way we’ll meet the scale of what homeowners, businesses and communities continue to need.
Having stepped away from my national role as president of business banking for Bank of America to focus full-time on this unprecedented recovery effort, I have had a seat at the table to aid in this historic next chapter of Los Angeles. One of the questions I am often asked in this effort is, “What keeps you up at night?”
As we approach the first anniversary of the wildfires, one issue that’s top of mind for many of us is the likelihood of a liquidity crunch.
The Liquidity Crunch
The Department of Angels’ survey of more than 2,300 fire-impacted residents shows that most families remain displaced while costs of temporary housing and rebuilding costs are rising. Many impacted homeowners will soon hit a financially perilous cliff as insurance-funded rental housing subsidies run out – near the same time that mortgage lenders’ 12-month forbearance programs begin to end in early 2026.
This means homeowners may be paying two housing payments at once: rent for their temporary housing plus the mortgage on a home that doesn’t exist – rapidly depleting cash reserves, or liquidity.
Such a cash run-rate will be unsustainable for most families and will also surely accelerate the pressure on a homeowner to simply sell their lot and leave the neighborhoods they cherish.
Some survivors may still opt to sell, but they shouldn’t be forced into it by this financial cliff. Altadena and Pacific Palisades are multi-generational bedroom communities where many feel deep ties. A wave of lot sales and investor redevelopment will change the unique fabric of these beloved neighborhoods.
Rebuilding Costs
An analysis by Bank of America utilizing internal mortgage and insurance data, along with home data from the Urban Land Institute, suggests the collective shortfall between the average insurance payout and current building costs is in the billions – more than $5 billion across both fires – with average per-home gaps in the hundreds of thousands of dollars. Survivors are facing this scale of shortfall even when their properties have been well insured.
Multi-Sector Response
Our role as a bank is straightforward: bring our experience, capital and connections to find ways to mitigate the liquidity crunch and help close the cost gap to rebuild a home.
We’re focused on three financial levers that can help ease the liquidity crunch for qualifying Bank of America mortgage clients who choose to rebuild their homes:
- Extended Forbearance - While our initial forbearance is 12 months, we will extend forbearance up to two additional years for eligible clients while rebuilding. This continued mortgage payment relief will help preserve monthly cash flow.
- Rebuild Line of Credit - This innovative approach for our existing mortgage borrowers offers a line of credit product to eligible clients that will help bridge the difference between what insurance covers and current construction costs to rebuild.
- Interest Rate Preservation - For those utilizing the Rebuild Line of Credit, they may be eligible to retain the original interest rate on their underlying mortgage, which is likely lower than current rates.
Together, this approach is called the BofA Rebuild Solution, and it is expected to be available in February 2026.
Other sectors are also working on ways to address a liquidity crunch and residential rebuilding needs.
The California Community Foundation, for example, is coordinating a flexible bridge fund to help fire-impacted households as insurance and forbearance benefits expire; Community Development Financial Institutions (CDFIs) are preparing low-cost gap loans and construction navigation.
Collaboration is Key
Much of this effort is the result of the collaborative approach that local leaders have forged.
Bank of America convened other financial industry and asset management firms around L.A.’s recovery needs and continues to connect business clients from a variety of industries with key stakeholders to help solve for arising needs.
Another notable effort has been the strategic collaboration between businesses and philanthropic foundations, like the California Community Foundation and Annenberg Foundation, which bring real-time visibility into survivor needs through their nonprofit partners, while the business sector brings speed, innovative thinking and capital. We’ve formalized this group as the LA Wildfires Civic Leaders Council.
Surfacing issues and anticipating needs, along with testing solutions and problem-solving for things like a liquidity crunch, will be a big part of L.A.’s recovery.
If we keep listening to survivors, aligning our work and moving quickly, we can collectively help families return home, rebuild and restore the fabric of our communities.
Having banked L.A. for over 110 years, Bank of America was also directly affected by the fires, losing two financial centers and seeing hundreds of employees and thousands of clients impacted.
In response, we’ve:
- Awarded $3.5 million in grants to nonprofits providing emergency relief and basic needs, including $1 million for small business recovery;
- Extended repayment forbearance and provided clients with individualized advisement;
- Reunited nearly 2,500 safe deposit box clients with their valuables stored in vaults at our two destroyed financial centers;
- Committed to rebuilding our destroyed financial centers; and
- Directed $13 million in capital to CDFIs for ongoing small business and housing assistance.
