Maryland Enacts New Mortgage Assumption Law for Divorcing Homeowners
The law makes it easier for divorcing individuals to assume, rather than refinance, mortgages. Margo had testified in support of the legislation.
Maryland Governor Wes Moore has signed into law Senate Bill 689 / House Bill 1018, which introduces a new requirement for conventional home mortgage loans in Maryland. The law takes effect on October 1, 2025, and applies to all mortgage lenders and mortgage lending businesses operating in the state.
Beginning on that date, any new conventional home mortgage loan originated in Maryland must include a provision allowing one borrower to assume the mortgage interest of the other in connection with a Judgment of Absolute Divorce, provided the assuming borrower meets the lender’s existing credit and underwriting standards. This may provide borrowers with an opportunity to preserve the original loan terms rather than refinancing into a new loan at prevailing market rates.
The law also applies retroactively to existing loans entered into before the effective date. For loans exceeding the conforming loan limits set by the Federal Housing Finance Agency—commonly referred to as jumbo loans—the statute expressly provides that these loans are deemed to include the assumption provision, even if such language was not originally included.
For traditional conforming loans, the law states that its provisions apply retroactively but does not use the same “deemed to include” language found for jumbo loans. As a result, there may be differences in how lenders interpret and apply the new requirements to conforming loans.
Timing requirements also differ between loan types. For jumbo loans, the statute specifies that the assumption right applies where the Judgment of Absolute Divorce is entered on or after October 1, 2025. This timing requirement is not expressly stated for conforming loans, which may lead to variations in implementation.
Margo Cook, President, Wealth and Engagement Planning, testified before the Maryland General Assembly in support of this legislation. “Through my work, I have seen first-hand the financial challenges that individuals—particularly those navigating the complexities of divorce—face when seeking to assume a mortgage on their marital home,” Margo said while testifying. “Over the past several years, interest rates have risen dramatically. Many divorcing homeowners have low-interest rate mortgages, and refinancing at today’s higher rates could impose significant financial hardship,” she said.
“Preserving existing mortgage terms may help some individuals remain in their homes rather than being forced to relocate. For parents, the impact is even greater, as keeping the family home often means preserving stability for their children - allowing them to stay in the same school district, maintain social networks, and remain in a familiar and supportive environment.”
We will continue to monitor developments as the effective date approaches and will provide updates to clients and professionals engaged in this area.
Image courtesy of the Executive Office of the Governor.
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