More than a year and a half after the wildfires devastated communities across Los Angeles County, thousands of homeowners remain caught between the cost of rebuilding and the financing needed to return home.
Los Angeles-based Lendistry Home Loans has been approved as a construction lender for California’s $100 million Disaster Rebuilding Assistance Program, an initiative advanced by the California Housing and Homelessness Agency. The designation marks a significant step for Lendistry’s Disaster Recovery Mortgage pilot, designed to help displaced homeowners in Pacific Palisades and Altadena bridge the gap between insurance proceeds and rebuilding costs.
Since announcing the pilot, 55 homeowners have completed interest forms, according to Lendistry, which expects to make formal applications available soon.
Research from Department of Angels, a nonprofit tracking wildfire recovery through quarterly surveys, identifies an estimated $5 billion rebuilding financing shortfall, with household gaps of approximately $500,000 to $600,000. The organization’s findings also indicate that roughly two-thirds of survivors remain displaced, while two in five cite out-of-pocket expenses as their greatest barrier to rebuilding. “The core problem LHL seeks to solve is a significant financing gap: insurance proceeds and other recovery funds are not fully covering the expense of rebuilding for many homeowners in LA,” said Lynn von Koch-Liebert, Head of Public Economic Development at Lendistry.
For homeowners in Malibu and Pacific Palisades, the median shortfall after insurance payouts exceeds $1 million, according to Department of Angels research cited by Lendistry. Some survivors continue paying mortgages on destroyed properties while covering temporary housing costs. Others have substantial equity and sufficient long-term income but cannot qualify for conventional construction financing because of reduced liquidity, delayed insurance settlements or disaster-related changes to their financial circumstances.
Consider a homeowner facing a $750,000 rebuilding bill but receiving only $450,000 from insurance. The resulting $300,000 shortfall can prevent construction from moving forward, even when the homeowner has the means to sustain a long-term mortgage. “Conventional lenders may decline to fund this individual given the homeowner’s existing obligations, limited liquidity, or the loan amount relative to current property value,” von Koch-Liebert said.
Lendistry’s Disaster Recovery Mortgage, or DRM, is structured as a construction-to-permanent mortgage, allowing homeowners to finance rebuilding through one closing rather than obtaining a construction loan and later refinancing.
Depending on eligibility, borrowers may combine a first mortgage with a subsidized “silent second,” which defers principal and interest payments. An interest reserve may also reduce mortgage costs during construction, particularly for families simultaneously paying rent.
First mortgages range from approximately $100,000 to $3 million, while silent-second financing ranges from $50,000 to $250,000. Loan terms extend from 15 to 30 years. The program covers owner-occupied single-family homes, two- to four-unit properties and accessory dwelling units built alongside a primary residence. Underwriting may also recognize additional qualifying income, including anticipated ADU rental income. “Existing recovery resources each solve part of the problem but not the whole equation,” von Koch-Liebert said. “Insurance covers only insured losses, public assistance has eligibility and funding limits, and conventional lenders underwrite construction loans to standards built for ordinary circumstances, not disaster recovery.”
The initiative launched with $20 million in seed capital, including $15 million from Bank of America and $5 million from the California Community Foundation. Lendistry estimates the initial funding could support more than 40 home rebuilds.
Its next objective is approximately $150 million to finance more than 250 homes, followed by an expansion to roughly $250 million and more than 450 homes. Nearly 12,000 homes were destroyed in the Los Angeles fires. Lendistry estimates approximately 6,000 homeowners could struggle to obtain the financing necessary to rebuild without alternative lending programs.
The lender’s approval for California’s $100 million Disaster Rebuilding Assistance Program connects its mortgage pilot with additional state recovery resources. The program is intended to expand access to construction financing through tools that can include loan-loss guarantees and interest-rate assistance.
The approval does not mean the entire $100 million has been allocated to Lendistry or that individual homeowner loans have already been approved. The broader financing model combines private mortgage capital, philanthropic investment and public credit support. Lendistry estimates every dollar of patient capital could unlock at least four dollars in private financing, with additional opportunities to recycle capital as loans are repaid.
The pilot was developed following listening sessions with survivors in Altadena and Pacific Palisades and consultations with construction experts, housing professionals, financial institutions, philanthropic organizations, California legislators and the California Housing and Homelessness Agency.
Those conversations shaped the program’s broader underwriting criteria, interest reserves, deferred-payment financing, homeowner counseling and construction-navigation assistance. Participating homes must also meet Insurance Institute for Business & Home Safety Wildfire Prepared standards.
The approach raises an important question, whether additional borrowing could deepen the financial strain already facing wildfire survivors. Von Koch-Liebert said the program is designed to prevent homeowners from carrying unsustainable debt. “DRM does two critical things: it pays off any existing mortgage on a home that no longer exists, and it finances a new home on the same lot, so homeowners aren’t carrying two mortgages, or a mortgage plus rent, while also building new equity,” she said. “As a matter of law and principle, Lendistry will never lend to someone it doesn’t believe can repay.”
Borrowers must complete home-loan education and meet with a licensed mortgage loan officer. Additional technical assistance and construction-navigation services are available through The Center by Lendistry, the lender’s affiliated nonprofit.
Beyond individual homeowners, prolonged displacement threatens the economic stability of entire communities. “Permanent displacement damages community health well beyond the individual homeowner,” said Teddy Larkin, Senior Government Relations Manager for Lendistry.
Small businesses supported by The Center by Lendistry have experienced reduced foot traffic and customer retention since the fires, she said. “At scale, prolonged displacement means families leaving for good, schools losing students, businesses losing customers, vacant properties, and a weakened local tax base and community institutions,” Larkin said. “Rebuilding restores that crucial economic and social fabric.”
Maryam Zar, president and CEO of the Malibu Pacific Palisades Chamber of Commerce, said the partnership between Bank of America and Lendistry represents an important investment in the region’s recovery. “Having heard about this initiative from Bank of America’s leadership, I’m especially pleased to see its partnership with Lendistry taking shape. This is exactly the kind of meaningful investment our communities need,” Zar said. “Recovery in Pacific Palisades and Altadena is well underway, but the road ahead remains long, particularly for small businesses and commercial property owners struggling to return. Access to capital is essential to rebuilding a thriving community.”
Zar said the Chamber is also working with Lendistry to address commercial recovery, a related effort separate from the homeowner mortgage program. “The Malibu Pacific Palisades Chamber of Commerce (PaliBu) is working with Lendistry to bring much-needed capital directly to our commercial recovery,” Zar said. “Rebuilding homes is only half the equation. Our businesses need resources to reopen, reinvest, and thrive. The recovery of both communities depends on it.”
For communities such as Pacific Palisades and Altadena, restoring homes and local businesses are interconnected challenges. Residents need functioning neighborhoods to return to, while businesses depend on returning customers to survive.
Lendistry intends to use the initial phase of the mortgage pilot to demonstrate that displaced homeowners can be responsibly financed through construction and transitioned into sustainable long-term mortgages.
The 55 interest forms submitted since the announcement represent prospective borrowers, not completed loan applications or approvals. Formal applications are expected to become available soon. “LA is deliberately the proving ground for a model meant to extend to future disasters,” von Koch-Liebert said.
If successful, the pilot could establish a framework for responding to similar financing gaps following future natural disasters. Everett Sands, CEO of Lendistry, said the program’s ultimate measure of success will not be the amount of money loaned. “We’ll know the program has worked when families return to rebuilt homes and stay there sustainably,” Sands said. “Dollars deployed and loans originated matter as near-term indicators that capital is reaching homeowners, but they’re not the end goal - completed rebuilds, restored homeownership, and reduced permanent displacement are.”