Maryland Legal Alert for Financial Services
Mortgage Assumptions in Divorce Situations
As noted in our September 2025 Maryland Legal Alert, Maryland law requires (as of October 1, 2025) certain lenders to permit the assumption of covered loans in connection with the granting of a decree of absolute divorce (where married co-borrowers divorce). The Maryland law applies to non-government-backed mortgage loans that are “conventional home mortgage loans” (loans secured by a residential dwelling).
The Virginia legislature recently made a similar change. Beginning on July 1, 2026, Virginia loans secured by residential, owner-occupied real property must be assumable in certain divorce situations. The new law applies to “conventional home mortgage loans”, which are loans primarily for personal, family, or household purposes secured by a mortgage or deed of trust on owner-occupied residential real estate that is improved by the construction of any housing of four or fewer dwelling units. Under the new Virginia law, lenders must disclose the right to assume (subject to the assuming borrower qualifying for the loan on their own) within three days of receiving a completed loan application.
In addition to changes to form promissory notes, lenders will also need to change the assumption language in Loan Estimates and Closing Disclosures to disclose that covered loans “may be assumable under certain circumstances.”
For more information concerning this topic, please contact Jodie E. Bekman and Christopher R. Rahl.