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California homes, businesses rebuilding amid devastating wildfire season

Less than two months after wildfires tore through California's wine country, flames broke out again Dec. 4, devastating large portions of Southern California.

Banks in the affected areas have experienced moderate disruptions, but are working with customers to address lending needs. Some say there could be new opportunities in the residential and commercial real-estate arenas.

Kevin Paffrath, a Ventura-based realtor, said "there is a lot of enthusiasm in the rebuild market." While demand could push pricing higher in the short term, he said it should "balance out" as the community quickly rebuilds.

"It's horrible what happened," he said in an interview. "But the fact of the matter is a lot of people are looking at it and going, 'I wouldn't mind living in a nice new hillside home.'"

About 60% of a 272,000-acre burn, called the Thomas Fire, has been contained in Santa Barbara County and Ventura County, the California Department of Forestry and Fire Protection, or Cal Fire, reported Dec. 20. At least two people, including a firefighter, have died. Strong winds and dry conditions continue to challenge efforts to contain the flames.

Five smaller fires began around the same time as the Thomas Fire and have been contained. Los Angeles’ Skirball Fire destroyed six homes, and the Lilac Fire in San Diego County destroyed more than 150 structures.

Janet Garufis, chairman and CEO of Santa Barbara-based Montecito Bancorp, said client property losses appear "pretty minimal."

"I think the bigger impact is the impact to the local businesses," she said in an interview. "It's hard to know until you get to the other side of this what it will be like."

But she said economically, she expects the community to feel the impact "for some time to come."

"All the restaurants and shops are under mandatory evacuation," she added. "Everything is closed. Many people have left town."

This is the third-largest wildfire in California history, forcing nearly 100,000 people to evacuate, destroying 770 single-family residences, and damaging 207 more. Cal Fire said about 18,000 structures remain at risk. Nineteen commercial structures have been destroyed, and hundreds of other structures have been damaged or destroyed.

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On Dec. 7, The Office of the Comptroller of the Currency released guidance allowing banks to close branches in areas affected by emergency conditions. The OCC encouraged banks to "reopen as quickly as possible to address the banking needs of their customers." The Department of Business Oversight issued a similar notice allowing state-chartered banks to close branches in affected areas.

Fannie Mae and Freddie Mac are offering mortgage assistance options for individuals in disaster-stricken areas, making it easier for institutions to offer leniency programs. The options allow servicers to suspend mortgage payments for up to 12 months without penalty.

Garufis said two Montecito offices closed due to poor air quality, noting it was "snowing ash." Other offices are open but with reduced hours. She said the company plans to initiate disaster-recovery loan programs, and will host question-and-answer sessions to allow clients to meet with lenders.

A JPMorgan Chase & Co. spokesperson said it has "been up and down as far as branch closures." She told S&P Global Market Intelligence the company is working with customers on a case by case basis. "Whatever people need," she said, "just call, and we will definitely work with you."

Bank of America Corp. is taking similar measures. A spokesperson said the company has been "proactively reaching out to customers by email," and connecting them with a personalized client financial assistance line, based on specific needs, "ranging from waived fees on accounts and credit cards to temporary payment forbearance plans on home loans." Wells Fargo & Co. also said customers in need of immediate assistance are encouraged to contact the bank.

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Northern California is still reeling from the fires that broke out in early October. Insurance Commissioner Dave Jones called them one of the most “deadly and costly” events in the state’s history. The fires displaced more than 100,000 residents and killed 44 people. In an interview with CNBC, Jones warned insurers may drop coverage or raise rates for homes in areas impacted by wildfires.

Total insured losses from the October fires have topped $9.4 billion, according to the California Department of Insurance. According to its recent report, 5,747 residential properties and 997 commercial properties are total losses.

At least 27 wineries were damaged or destroyed by the October fires. At the time, banks reported minimal impact to their loan portfolios.

The fires also took a toll on the cannabis industry, the Los Angeles Times reports, since there are few banking and insurance options for the crop. While it will be legal to grow and sell marijuana beginning Jan. 1, 2018 in the state, it remains illegal under federal law. The state is reportedly in discussions with bankers and regulators about the possibility of creating a network of institutions to serve the industry.

Red flag warnings have been issued for other portions of the state. According to the U.S. Forest Service, 129 million dead trees spanning 8.9 million acres in the central and southern Sierra Nevada region are a fire hazard. The USDA said 2017 is the costliest year in U.S. history in terms of wildfire suppression.

Later this week, Congress will consider an $81 billion emergency disaster aid package for areas impacted by 2017's slew of natural disasters, including California, Texas, Florida, Louisiana, Puerto Rico and the U.S. Virgin Islands.