Legal Question in Real Estate Law in California

You are never going to be able to do a true assumption of the underlying debt without the bank's consent. There are two ways of taking title to property encumbered by an existing deed of trust, subject to, and subject to coupled with an assumption.

If she deeds the property to you (without paying off the obligation) the property will always be subject to the deed of trust. That means if you or her default in the payments, the lender can always foreclose against your interest and hers, since your interest is said to be "subject to" the existing deed of trust. The fact that the bank does not agree to you assuming the underlying obligation of the promissory note, however, means she will also be personally liable on the underlying obligation. There is no way to assume this obligation yourself, unless the lender consents, either through refinancing, or refinancing through a different lender.

Additionally, her deed to you may trigger the "due on sale" clause in the deed of trust, which causes the entire unpaid balance to accelerate.

You should also make sure you don't construct a deal that violates the law, such as the home equity sales contract law, Civil Code section 1695 - 1695.17.

I do not have any reliable information on how thoroughly lenders are policing their loans for due-on-sale situations. With so many properties under water, it seems to me they would rather accept payments than foreclose or call the loan. Nevertheless, I have seen fairly recent instances of banks returning checks from people who aren't the borrower.

My recent experience is that lenders are agressively foreclosing on properties when the borrower is no longer the legal owner, i.e., owner deeds the property away. In addition, that would likely be a fraudulent transfer, that any creditor of your friend could file suit against you to undo. As for assuming the mortgage, I haven't seen an assumable mortgage in California in 25 years. The one situation in which I have seen SOME banks accept a change in ownership is if the bank is in first position and a second position lender forecloses, and then continues making payments. As long as the loan is current and kept current, SOME banks will at least allow time for the foreclosing second to refinance or "flip" the property. The big question, though, if your friend is willing to walk away, is why don't you just lend her the money to make the payments long enough to sell the place and get her equity out. It sounds like you are taking real advantage of your "friend" if you are going to take all her equity for $15,000. If she is a senior citizen you might even be guilty of elder financial abuse in this situation.