Legal Question in Real Estate Law in California

Re: assuming my debt

There are at least three ways to do this, the main difference being whether you involve the lender in the process or not.

The first way is to refinance the loan, and sell the half interest, all through a formal escrow. That gets rid of your loan obligation by paying off the loan. You don't need the current lender's permission, but your brother does have to qualify on his own income and credit. This is the cleanest way to do it.

The second way is to induce the current lender to allow the loan to be rewritten to remove your name as a borrower. If this loan is a purchase-money first, it may be willing to do this, since its recourse in the event of a default would be to the collateral, not the borrowers. Then you would use a quitclaim deed to transfer your ownership interest to your brother. An escrow service could assist you with this.

A third possibility is to just do a deal between yourselves, without involving the current lender or getting a new loan. Quitclaim your half interest to your brother in exchange for his promise to pay all the loan payments and indemnify and hold you harmless. This seems to be the type of transaction you're asking about. The problems are that it would likely violate a provision of your existing loan, e.g. a "due-on-sale" clause, and while it would make your brother responsible for the loan payments as between the two of you, it does not take your name "off the loan."

Keep in mind that ownership of property and being liable on the loan are two separate concepts; selling your ownership interest does not take you off the loan, it merely takes you off title. If the lender doesn't have recourse to you personally, i.e. because it is a purchase-money first loan and they aren't entitled to a deficiency judgment, being on the loan is unlikely to cause you a direct financial loss, although any foreclosure of a loan with your name on it will affect your credit scores.

I'd prefer a method that does not require hiding information from the current lender, e.g., #1 or #2, or perhaps #3 with the lender's written waiver of any due-on-sale provision.

Re: assuming my debt

The lender would have to agree to accept only your brother as the responsible obligor on the loan and there is little reason for them to do so, as you are both obligated jointly and individually already. The only way to release you from the loan would be for your brother to get a completely new loan.

Re: assuming my debt

No particular form is required. But, your agreement should be in writing and the deed back to him should be recorded. That being said, it does not relieve you from the debt as far as the lender is concerned unless you get a release from the lender called a novation.