Legal Question in Real Estate Law in California

You mean your sister's name is on the title (not the deed) to the home. Are you on title as well, or is she the sole legal (of record) owner?

Lenders consider the situation "normal" and easy to deal with when the party or parties who own the property being offered as collateral is/are the same as the party or parties who want to borrow, or to modify or refinance, the loan. Among other things, anyone shown on record title at the county recorder's office will be treated as at least a co-owner, and someone whose signature will be necessary to collateralize the loan with the property. This pretty much applies to modifications as well as original loans and refinancings, although it is technically possible to do a modification with only the borrower(s) signatures and not the property owner(s).

If you added your sister to title after the loan in question was made, you probably violated the loan's terms in doing so, Most loans have a "due on sale" clause that also makes the loan due upon transfer of a half interest by gift, for example. If this be the case, the lender will probably point this out to you early in the negotiations, and although the lender may not enforce the clause it certainly won't make things easier.

Perhaps needless to say, removing your sister from title is not something that you can do without her cooperation. She would have to sign and deliver a notarized deed to you, conveying her interest, which you would then record. This will trigger a reassessment of the transferred interest for property tax purposes, and probably will have income-tax consequences.

A full analysis of the situation would require more information, such as the exact way title is now held, the dates the various interests were acquired, the date of the loan or loans, the loan terms and party or parties, and the approximate fair market value of the house on each date.

To answer your specific question, I believe in theory a loan modification can be done by the borrower and lender alone, without the signature(s) of co-owners, because it requires only modification of the note, and not the deed of trust, but any disparity between borrower(s) and owner(s) is likely to come to the attention of the lender and may create problems because of the possible violation of a due-on-sale clause and the tax consequences of property transfers.