Until recently, a divorcing Maryland homeowner who, through a judge’s ruling or mutual agreement, received the opportunity to retain the marital home in divorce proceedings would need to go through the burdensome, costly, and stressful process of refinancing any jointly held mortgage in order to remove their former spouse. This often proved an insurmountable challenge given rising interest rates, significant closing costs, or the inability of the spouse to individually qualify for refinancing. When refinancing wasn’t an option, the home would usually need to be sold or the spouses would remain financially bound together on the mortgage — both unappealing scenarios.
Recognizing this hardship that impacts so many divorces in Maryland, the state recently enacted a law (House Bill 1018) that requires conventional lenders issuing mortgages in Maryland to offer a divorcing spouse the ability to assume their existing mortgage as written without the need to refinance. A mortgage assumption means that the loan itself remains the same, including its length, interest rate, and monthly payment, but one spouse is removed from liability.
The new law applies to mortgage loans issued on or after October 1, 2025, as well as mortgages issued before that date if the decree of absolute final divorce was entered on or after October 1, 2025. Unfortunately, the law only applies to “conventional mortgage loans” and does not automatically require a lender to allow assumption of government-backed loans (e.g., FHA, VA, or USDA loans), or mortgages from large national banks (e.g., Bank of America, Chase, or Wells Fargo). However, assumption of those loans is sometimes possible even when not mandated by law.
If you have questions about this new law, issues related to mortgages and home ownership in divorce proceedings, or any other family law related questions please contact Ferrier Stillman or Keri Kemmerzell at Tydings.