When your bank gets the fire insurance money

Summary

Marketplace Morning Report: "When Your Bank Gets the Fire Insurance Money"

Release Date: May 7, 2025
Host: David Brancaccio, Marketplace

In the May 7, 2025 episode of Marketplace Morning Report, host David Brancaccio delves into a series of pressing economic and business issues, ranging from central banking policies and international education trends to the nuanced challenges faced by homeowners recovering from devastating wildfires. Below is a detailed summary of the episode's key discussions, insights, and conclusions.

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1. Central Bankers' Policy Decisions Amid Trade Tensions

Timestamp: 00:31 - 00:59

David Brancaccio opens the episode by addressing the anticipated decisions of America's central bankers in light of ongoing trade tensions and their potential economic impacts. With tariffs possibly slowing the economy and simultaneously raising prices, experts widely expect the Federal Reserve to maintain current interest rates in the forthcoming announcement scheduled for just over seven hours from the episode's airing.

Simultaneously, China has taken proactive steps by lowering its interest rates in response to the trade war. This move aims to stimulate borrowing and inject confidence into the Chinese economy. Jennifer Pack, Marketplace's China correspondent based in Shanghai, provides deeper insights into these developments.

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2. China's Interest Rate Cuts and Economic Confidence

Timestamp: 00:59 - 01:39

Jennifer Pack:
“China's central bank wants to inject some confidence in the Chinese economy. Beforehand, it will trim several interest rates to make it cheaper to borrow money and lower the amount of cash banks must hold in reserves by half a percent. But banks are not low on funds to lend. There just isn't enough demand for borrowing from households or businesses.” (00:59)

Pack explains that China's recent interest rate reductions are part of broader measures to bolster economic confidence amidst the trade war with the United States. Despite these efforts, the actual impact may be limited due to subdued demand for borrowing, a consequence of both cautious consumer behavior and ongoing concerns over the country's property market slump. Additionally, heightened U.S.-China tensions dampen the effectiveness of these monetary policies. Pack concludes that while these measures are commendable, analysts predict only a modest impact on stimulating the economy.

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3. Decline in International Student Enrollments in the U.S.

Timestamp: 01:39 - 03:14

Shifting focus to the education sector, Brancaccio highlights new data indicating a significant decline in international student enrollments in the United States. According to the Association of International Educators (NAFSA), there is an expected 13% dip in postgraduate program enrollments for the upcoming academic year.

Elizabeth Trovall provides an in-depth report on the underlying causes of this decline, emphasizing the role of stringent U.S. border policies and visa challenges.

Elizabeth Trovall:
“The uncertainty that international students currently in the US have experienced have had a ripple effect on prospective students and how they're looking to the U.S. International students tend to be post grad, often in STEM fields.” (02:00)

Trovall elaborates on statements from NAFSA's CEO, Fanta A, who attributes the enrollment downturn primarily to restrictive visa policies and the broader uncertainty surrounding the political climate. The report underscores the impact on STEM fields, where international students play a pivotal role in driving innovation and research. Trevor Thornton from Arizona State University adds to the discussion by highlighting the anxieties among students entering careers in high-demand sectors like semiconductors, noting that while some have secured interviews and job offers, there is pervasive fear about future employment stability.

John Harabedian:
“There’s a lot of fear. The ones who are a year behind them are wondering what they’re going to be doing a year from now.” (02:27)

Furthermore, Wendy Wolvert from Cornell University shares that while current student interest remains robust, any escalation in visa restrictions or immigration chaos could severely deter future applicants. The conversation concludes with an acknowledgment of the economic and innovative contributions that international students bring to the U.S., both financially and intellectually.

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4. California Wildfires and the Complexities of Insurance Payouts

Timestamp: 03:14 - 06:51

One of the episode's most impactful segments addresses the aftermath of the catastrophic Los Angeles area wildfires in January, which decimated over 11,000 single and multi-family homes. The discussion centers on the unexpected complications homeowners face when receiving fire insurance payouts, especially those with existing mortgages.

Brancaccio introduces Assemblyman John Harabedian, a Democrat representing a district affected by the Eaton fire, to shed light on the legislative efforts aimed at assisting impacted homeowners.

David Brancaccio:
“Why you didn't see it. And here's the other surprise. The insurance payout money could be hundreds of thousands of dollars or more. Pays little if interest, even if it sits for months or years on hold.” (03:14)

Harabedian explains that insurance payouts in the event of a total property loss often come with both the homeowner's and the mortgage lender's names on the check. This arrangement allows banks to oversee the funds to ensure that reconstruction efforts meet specific criteria outlined in mortgage agreements. However, this system can leave homeowners without access to potentially substantial interest earnings on these funds.

John Harabedian:
“If you have a mortgage on your property and you experienced a complete loss, the post loss insurance payment actually goes to the mortgage lender and the mortgage lender will hold onto it sometimes for a very long extended period of time.” (04:29)

To address this issue, Harabedian is advocating for Bill AB493, which seeks to mandate that any interest accrued from the held insurance funds be directed to the homeowners rather than retained by the banks. He illustrates the financial implications with a hypothetical scenario, noting that even modest interest rates can translate into significant sums over time. For example, a 4% return on a $500,000 payout could yield $20,000 in interest after one year.

John Harabedian:
“My bill AB493 does actually make sure that any interest that is earned off of that post loss insurance payment actually goes to the holder of the policy and isn't kept by the banks.” (04:56)

Brancaccio references recent legislation in Colorado, where a similar law was enacted in May, providing a precedent for California's proposed changes. Harabedian emphasizes California's potential leadership in adopting such protective measures, highlighting the critical need to support homeowners in their most vulnerable moments.

John Harabedian:
“There is precedent. And California usually is a leader on smart policy. Unfortunately, in this instance, we're behind really.” (06:20)

The segment underscores the broader financial strains on homeowners, many of whom are underwater on their mortgages or underinsured, and the importance of legislative actions in safeguarding their financial interests during recovery from natural disasters.

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5. Personal Accounts and Ongoing Coverage

Timestamp: 06:52 - 07:28

Brancaccio shares a personal touch by revealing that his own house in Altadena was destroyed by the wildfire. He mentions ongoing coverage and resources available for those affected, including updated videos on Instagram and a dedicated series by colleague Kai Rysdal focusing on business rebuilds post-fire, accessible through Marketplace Online in Los Angeles.

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Conclusion

The episode of Marketplace Morning Report effectively navigates through complex economic policies, international education trends, and critical legislative developments affecting wildfire victims. By featuring expert interviews and personal narratives, the show provides listeners with a comprehensive understanding of the multifaceted challenges and ongoing efforts to address them. Whether it's the ripple effects of trade wars on central banking decisions, the significant drop in international student enrollments due to restrictive visa policies, or the legislative push to protect homeowners from unfavorable insurance payout practices, Marketplace ensures its audience is well-informed with rich, engaging, and actionable insights.

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Notable Quotes:

• Jennifer Pack (00:59): “There just isn't enough demand for borrowing from households or businesses.”
• Elizabeth Trovall (02:00): “The uncertainty that international students currently in the US have experienced have had a ripple effect.”
• John Harabedian (04:29): “If you have a mortgage on your property and you experienced a complete loss, the post loss insurance payment actually goes to the mortgage lender.”
• John Harabedian (06:20): “California usually is a leader on smart policy.”

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This detailed summary encapsulates the episode's key discussions and insights, providing a comprehensive overview for both regular listeners and newcomers alike.

Transcript

[Elizabeth Trovall]

At Energy Trust of Oregon, we understand that energy isn't just what happens when you flip a switch, it's what happens afterwards. It's a home that can provide both shelter and peace of mind. It's a business that can run more efficiently and keep their dream alive. And it's communities that can thrive today and flourish tomorrow. That's energy. And that's why we partner with local utility companies to help you save energy and lower costs. For cash incentives and resources that can help power your life, visit energytrust.org.

[David Brancaccio]

When your bank gets the fire insurance money. I'm David Brancaccio in Los Angeles. First, we'll know in just over seven hours how America's central bankers plan to proceed, given tariffs potentially slowing the economy and raising prices at the same time, the expectation is for the Fed to leave interest rates unchanged for now. China today lowered its interest rates in response to the trade war. Here's Marketplaces China correspondent Jennifer Pack in Shanghai.

[Jennifer Pak]

The announcement comes hours after American and Chinese officials have agreed to meet this weekend for trade talks. China's central bank wants to inject some confidence in the Chinese economy. Beforehand, it will trim several interest rates to make it cheaper to borrow money and lower the amount of cash banks must hold in reserves by half a percent. But banks are not low on funds to lend. There just isn't enough demand for borrowing from households or businesses. And and these measures, similar to the ones last fall, say analysts, will have a modest impact. Businesses and consumers are still cautious about China's property slump and the U. S. China tensions in Shanghai. I'm Jennifer Paak for Marketplace.

[David Brancaccio]

Amid tougher U.S. border policies, new data point to fewer international students coming to the US for higher education. For instance, the association of international educators NAFSA, finds a 13% dip in enrollments in postgraduate programs for the next academic year. Marketplaces Elizabeth Trovall has that visa issues.

[Elizabeth Trovall]

And other government policies are the top reason NAFSA CEO Fanta A says they're seeing a decline in international enrollment. The uncertainty that international students currently in the US have experienced have had a ripple effect on prospective students and how they're looking to the U.S. international students tend to be post grad, often in STEM fields. Arizona State University's Trevor Thornton teaches several students entering careers in semiconductors.

[John Harabedian]

They're getting interviews at these companies, getting jobs at these companies, but there's a lot of fear. The ones who are a year behind them are wondering what they're going to be doing a year from now.

[Elizabeth Trovall]

And Wendy Wolvert with Cornell, where students have dealt with visa revocations, says interest in the school remains strong for now. But if there were more severe actions.

[John Harabedian]

And more chaos in the immigration landscape, I think that could have a real effect.

[Elizabeth Trovall]

She says these students bring dollars, innovation and talent to the U.S. i'm Elizabeth Trofal for Marketplace.

[David Brancaccio]

The two big Los Angeles area wildfires in January destroyed more than 11,000 single and multi family homes. For those with insurance and a mortgage on the property came what was probably a new piece of personal finance information. If the insurance company writes a check after a fire, the check comes with two names on it, the property owner's and the banks. Turns out the mortgage lender gets to hold the money until the property owner can show they've reached various stages of rebuilding. It's in the fine print of your mortgage document. Why you didn't see it. And here's the other surprise. The insurance payout money could be hundreds of thousands of dollars or more. Pays little if interest, even if it sits for months or years on hold. A member of the California assembly whose district includes one of the centers of the fire, Altadena, is pushing a bill to get insurance money held in escrow to homeowners. I spoke to Assemblyman John Harabedian, a Democrat. Good morning.

[John Harabedian]

Thank you for having me.

[David Brancaccio]

So we should explain. I mean, who knew? If you're lucky enough to have fire insurance and you're lucky enough to have gotten the insurance company to send some of the money, what happens if the homeowner has a mortgage, owes money to the lender on the property, that check comes to you, but it also comes to somebody else.

[John Harabedian]

That's exactly right, David. If you have a mortgage on your property and you experienced a complete loss, the post loss insurance payment actually goes to the mortgage lender and the mortgage lender will hold onto it sometimes for a very long extended period of time. What my bill AB493 does is actually make sure that any interest that is earned off of that post loss insurance payment actually goes to the holder of the policy and isn't kept by the banks.

[David Brancaccio]

Yeah, if it's a low interest rate, it might not be that much money. But if I can get a CD, a certificate of deposit for 4%, if I shop around 4% on $500,000 that maybe the mortgage company is holding for you is 20 grand after just a year and you might just be starting your rebuild in a year.

[John Harabedian]

That's right. And as anyone in this position knows full well, there are a lot of needs financially and most people are underwater. They don't have the bank account to pay for everything. They were underinsured. And so anything that we can do to protect the financial rights of these homeowners and of these victims is really critical.

[David Brancaccio]

Some people may be saying, how could it be? I don't get interest. But if you look deep in the wording of when you sign the mortgage, there's typically a clause that says this, your bill would change this. Are you getting traction on that thing?

[John Harabedian]

We're getting a lot of support. I think a lot of people are surprised and confused as to why historically this interest wouldn't go to the homeowner who lost their home. And the governor's office has been extremely supportive. And I'm very confident once it gets to his desk, he will sign it and we will change this.

[David Brancaccio]

I was talking to an Altadena homeowner who was on fire about this issue of not getting interest, and he pointed me to a law that changed in the state of Colorado. In fact, it was just signed into law last May that would do what you're trying to do here in California. So there is precedent.

[John Harabedian]

There is precedent. And California usually is a leader on smart policy. Unfortunately, in this instance, we're behind really. This is about protecting those in one of the most vulnerable positions that they'll ever be in in their lives. And it's really trying to lift them up and make sure that they have as much relief and as much help from all different directions as possible.

[David Brancaccio]

John Harabedian, a California assemblyman, a Democrat who represents the district devastated by the Eaton fire. Assemblyman, thank you very much, David.

[John Harabedian]

Thank you.

[David Brancaccio]

We're also mindful that many people haven't gotten there insurance payouts yet or may have had no insurance at all. My house in Altadena burned up in that fire. We're fine, but I've been sharing what I'm learning on, for instance, Instagram. Go to Marketplace APM to see our updated video. My colleague Kai Rysdal and his team also has an ongoing series on businesses rebuilding after the fires, which now streams from Marketplace Online in Los Angeles. I'm David Brancaccio. Marketplace Morning report from APM American Public Media.

[Rob]

Hi, this is Rob from London, Ontario. Marketplace is an amazing resource and part of my daily routine. I get highly credible information delivered in an intelligent, interesting, and at times humorous but always engaging manner. My day would be lessened without access to Marketplace. Join me in supporting Marketplace with a gift today. Go to marketplace. Org Donate.