Legal Question in Real Estate Law in California

The immediate problem I see with a deal like this is that nearly all home loans have a "due on sale" clause that would also apply to making a gift of the home. So, technically, your loan is and has been for several years, immediately due in full. Now, the lender may not have noticed, or the lender may not care......but you are at some risk of getting a payoff demand, even if the payments are current. If you had contacted the lender at the time you were planning the gift, it MIGHT have agreed to waive the due-on-sale provision, probably for a fee.

Another problem or potential problem is that disposing of real property has tax consequences, even or perhaps especially when it is a "gift." Both the donee and you should become aware of the federal and state taxes (gift and capital gains or losses) that may be assessed against one or the other of you as a result of the transaction.

It is also possible that there could be a property tax impact, but you would have learned about that when or shortly after you recorded the title transfer.

You might want to contact an experienced real estate lawyer in your county Perhaps, especially if the deed were never recorded, the gift transaction can be reversed. However, keep in mind that a properly-executed deed becomes irreversibly effective the moment it is delivered to and accepted by the grantee......even tearing it up or burning it does not reverse the transfer contained therein, nor does failure to record it affect the validity as between the parties thereto. Reversing a deed requires execution of a new deed, back to the original grantor.

You've already created some problems. First of all, you have most likely triggered the "due on sale" clause in the deed of trust. When you say she took over payments, the lender was unaware of this arrangement, so she took title subject to the existing loan and deed of trust, but she did not take subject to coupled with an assumption of the debt.

An assumption of the underlying debt always requires lender approval. Creating any written contract with between you two is not going to be binding on the lender.

If she defaults and forecloses, the foreclosure will most likely be on your credit. Depending on other facts, which are not in your post, the lender may or may not be able to obtain a deficiency judgment. The lender will be able to go after your other assets, if the lender can obtain a deficiency judgment. Thus, without an assumption, you could possibly be liable.