A new Maryland law could change how divorcing couples handle mortgages and property division. Traditionally, many couples had to sell their homes during a divorce if the mortgage was not assumable. However, under new legislation signed into law in 2024, mortgage lenders are now required to permit loan assumption in divorce cases if specific conditions are met. While the law offers an important opportunity for stability, the process will likely involve careful legal planning and coordination.
Here’s what divorcing spouses in Maryland need to know.
What the Law Says
Maryland House Bill 1018 (2024), now codified as Chapter 202, requires lenders to permit the assumption of a mortgage when a home is transferred as part of a divorce proceeding, provided the assuming spouse qualifies under guidelines to be issued by the Maryland Department of Housing and Community Development (DHCD).
This means, if one spouse is awarded the marital home in the divorce, they could assume the existing mortgage, keeping the current loan, interest rate, and terms, without being forced to refinance or sell. Lenders must comply if the spouse satisfies creditworthiness standards that are still being developed.
Why This Matters in a Divorce
Before this law, most divorcing couples were presented with a significant barrier when one spouse wanted to keep the home. If the loan was not assumable, the only real options were refinancing the mortgage in one spouse’s name (which may not be feasible if credit or income is limited) or selling the property.
Now, the law provides a path for one spouse to retain the home and the existing mortgage. This is especially beneficial in:
- High-interest rate markets that make refinancing cost-prohibitive.
- Divorce cases involving children, where staying in the home can offer continuity.
- Situations where one spouse earns less, making refinancing difficult.
It opens the door to greater housing stability, but only if the requirements are met and the process is handled correctly.
Implementation Details are Still in Progress
The law is set to take effect on October 1, 2025. However, it cannot be fully implemented until DHCD and the Maryland Commissioner of Financial Regulation issue final guidance on the documentation, standards, and timelines that mortgage servicers must follow.
This delay means that divorcing spouses, attorneys, and even judges are working with a law whose broad impact is clear, but whose implementation remains undefined. Until formal regulations are issued, lenders may be cautious, and courts may hesitate to rely too heavily on assumption language in divorce agreements.
What We Know So Far
Although specifics are still pending, the law outlines central principles:
- Lenders must allow mortgage assumption if a divorce-related property transfer awards the home to one spouse, and that spouse satisfies the lender’s credit review.
- Assumption must occur without requiring the loan to be refinanced, avoiding a full re-qualification for a new mortgage.
- Mortgage servicers must accept applications from the assuming spouse and provide notice of approval or denial.
- The spouse remaining on the loan must be released if the other qualifies to assume the debt.
These provisions represent a significant shift in divorce-related property law in the state of Maryland.
Legal Complexity Remains
Even with the new statute in place, transferring both the home and the mortgage during a divorce is still a complicated process. A couple must have a written marital settlement agreement or a court order that clearly awards the home to one spouse, creating the foundation for the transfer.
In addition, the property deed must be updated to reflect the change in ownership. The spouse retaining the home will also need to submit a formal assumption request to the mortgage servicer, along with documentation of income, assets, and creditworthiness.
If any step is incomplete or improperly handled, there is a real risk that the lender may deny the assumption. In some cases, one spouse may end up remaining financially liable for a mortgage tied to a home they no longer own. Due to the financial and legal consequences, professional guidance is essential.
How This Affects Divorce Attorneys and Judges
The new law introduces additional responsibilities for divorce attorneys and judges, particularly when handling real property issues. Simply awarding a home to one party in a divorce decree may no longer be enough. Legal documents must now clearly state that the parties intend for the mortgage to be assumed by one spouse. This may require explicitly outlining the timeline for submitting assumption paperwork, as well as detailing what should happen if the mortgage lender ultimately denies the request.
Judges may also need to incorporate these provisions into their final orders. In some cases, a judge might condition the effectiveness of a property transfer on the successful completion of the assumption process. This approach helps protect both parties by ensuring that no one is left responsible for a mortgage tied to a home they no longer own or occupy.
A Chance for Greater Housing Stability
Maryland’s new law reflects a growing recognition that divorce should not automatically require families to sell their homes. The option to assume a mortgage can offer significant emotional and financial stability, especially for primary caregivers and children.
Still, the benefits will only be fully realized if divorcing couples act early, document everything clearly, and work with professionals who understand both the legal and financial sides of the issue.
Why Legal Guidance Matters
The divorce process already includes complex paperwork, tight deadlines, and emotional challenges. When the issue of mortgage assumption becomes part of the equation, the situation becomes even more complicated. An experienced Maryland attorney can help clarify your rights and explain the full range of options available to you under this new law in Maryland.
Legal counsel can also assist in coordinating directly with mortgage lenders, who may be unfamiliar with the new requirements and hesitant to proceed without clear direction. Submitting the proper documents correctly and on time helps avoid unnecessary delays or denials. If any part of the process stalls or encounters resistance, your attorney can step in to advocate for your interests and keep your case moving forward.
Contact Milstein Siegel to Review Your Divorce and Mortgage Options
If you are considering divorce in Maryland and want to know whether you can keep your home and your current mortgage, Milstein Siegel can help. Our attorneys are staying up-to-date on every development related to the new law and can walk you through your options with clarity and confidence.
Call (410) 760-9433 or contact us online to schedule a confidential consultation.