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What would an alternative be in the case of a lender being sold? Force a balloon payment for the balance? It seems a better alternative to be able to transfer the loan like any other asset.

Well, that's an entirely different, and special, case that would require different rules, of course.

That's not what causes loans to be transferred to others in the vast majority of cases.

You can, though, that's literally what refinancing is.

In many (but not all) cases, that's true enough, yes.

Return the house keys to the mortgage holder and walk away.

(This is about as convenient, pleasant, and useful advice as the "just quit your job" advice).

Actually it’s much easier than that, though not in the current interest rate environment: you just refinance, and likely save money along the way.

Note that your first mortgage in CA is nonrecourse, but a refinanced mortgage is not nonrecourse (meaning the lender can come after you personally if you end up underwater).