Legal Question in Real Estate Law in California

Re: A friendly break-up, but co-owned property is upside down

The lender will not release her from liability on the loan. However, if you can continue to make the payments, you can take a quitclaim deed from her, continue making the payments and the property will be yours. Loans don't have anything to do with who owns the property or who is on title to the property.

Re: A friendly break-up, but co-owned property is upside down

You're both liable on the mortgage if you both signed. Nothing is going to change that. IF it was a purchase money loan, then foreclosure would allow you both to walk away without being sued for that $150k+ deficiency. IF it was a refinance or if it is a 2nd TD, then you could both be sued for deficiency.

Re: A friendly break-up, but co-owned property is upside down

Well, there is a little connection between who's "one the loan" as borrower(s) and whos' on title as owner(s). While I don't disagree with Mr. Hoffman, I should point out that many loans have "due on sale" clauses that can be triggered, sometimes, by as little as one co-owner selling (or quitclaiming for no money consideration) to the other. I recommend that you pull out your loan papers, see what it has in the way of a due-on-sale provision, and then talk to the lender if there seems to be a problem. Often they will waive the clause in a case like yours, but sometimes they will charge a fee. Also I should add the usual warning about cash-out and non-purchase-money second loans; defaulting on them by doing a short-sale or similar deal with the holder of the first can result in a suit by the holder of such "sold out" second against both or either co-borrower.