Legal Question in Real Estate Law in California

Why would it not be legal. The mortgage is something entirely separate from ownership. A mortgage is a promise to repay a loan tha is secured by a lien upon the property; people who are not owners of the property can be on the mortgage [parents cosigning a loan for their kids]. If the wife has poor credit, she might not have applied for the loan. The tax bill wil be in the name of al owners of the property.

It is "legal" for a loan to be in the name of one spouse, while the ownership (title) stands in the name of both spouses in the sense that such an arrangement is not prohibited by any statute, policy or court decisional law. However, there are "legal reasons" why such arrangements are sometimes difficult to set up. Lenders normally want all owners of record to sign the loan papers. If X and Y co-own Blackacre, the Bank will require both X and Y to sign the loan and become co-borrowers. Otherwise, if only X signs, Bank's collateral is only X's part interest and Bank will have a tough time foreclosing because it cannot foreclose Y's share of the property.

Sometimes the situation you describe arises when X borrows while he is the sole owner of the property, and then X later sells or gives a part interest to Y. Lenders don't usually like this, and loan agreements often have "due on sale" clauses that give the lender the right to make the entire loan balance immediately due and payable upon the borrower disposing of all or part of his interest in the property serving as collateral.

On the other hand, lenders have been known to set up deals like this for the express purpose of making a loan that otherwise would not meet their standards because of a spouse's poor credit. Husband (or wife) buys the property and gets the loan. Then, a little later, the other spouse's name is added to title. If the lender has set up the deal, it probably could not or would not invoke a "due on sale" provision.