Legal Question in Real Estate Law in California

My guess is that you are not fully understanding what you are being told. Normally the lender REQUIRES a non-borrowing title holder to sign the deed of trust so that all owners subject their interests to the security interest of the lender, and so that the title insurance on the deed of trust covers 100% of the ownership of the property. It is possible that there is a banking regulation these days, following the mortgage meltdown, that prohibits banks from making jumbo loans if less than all the owners are borrowers. In any case, however, exactly what the regulations are doesn't really matter, since the lender is not going to lend to you if you don't meet their requirements, and the title company is not going to insure the mortgage without all the owners signing the deed of trust. So you are going to have to find a way to satisfy their requirements.