Contracts
In New Mexico, a 'novation' in a mortgage context means the original borrower is:
ARequired to make additional payments
BReleased from the mortgage obligation when a new borrower assumes the loan with the lender's approval✓ Correct
CAllowed to defer payments for 6 months
DGiven a new interest rate
Explanation
Novation in loan assumption occurs when the lender approves the new buyer as the borrower and formally releases the original borrower from all obligations. Without lender-approved novation, the original borrower remains secondarily liable even after assumption.
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