New California Civil Code § 2951 requires home loans to be assumed by co-borrowers in connection with divorce starting January 1, 2027. This will lead to parties in divorce not having to refinance and keep low interest rates for divorces and loans after January 1, 2027. Why did the legislature not apply this retroactively so divorcing couples can keep their low mortgage interest rates upon divorce? California Civil Code § 2951 states:
2951. (a) A conventional home mortgage loan originated on or after January 1, 2027, and secured by owner-occupied residential real property containing four or fewer dwelling units with multiple borrowers shall include provisions to allow for any of the existing borrowers to purchase the property interest of another borrower on the loan by assuming the seller’s portion of the mortgage in connection with a decree of dissolution of marriage, a legal separation agreement, or an incidental property settlement if the assuming borrower qualifies for the underlying loan, as determined by the lender.
(b) For purposes of this section:
(1) “Conventional home mortgage loan” means a mortgage loan that is not insured or guaranteed by the federal government.
(2) “Owner-occupied” means that the property is the principal residence of the borrowers and is security for a loan made for personal, family, or household purposes.