[WSBAPT] TODD and Refinancing issue

[Daniel Hembree]

If the refi borrower is the current title holder, then a TODD does not seem to threaten the secured status of refi note holder/DOT beneficiary.  I am probably missing something, but why would Fannie Mae be concerned about a TODD beneficiary if said beneficiary is not the refi borrower and has no present interest in the property?  The TODD beneficiary, if they come to hold title, will take subject to the secured refi debt.  Perhaps Fannie Mae wishes to avoid the appearance of the refi lender consenting to the potential transfer of ownership to a non-borrower that is of record when the refi occurred?  Or the ‘hassle’ of dealing with the non-borrower if they come to hold title as a result of a TODD?

The guidelines appear to have some internal conflict.  In B2-2-01 Establishing Borrower Ownership Interest, if the property is subject to a life estate, the life estate holder MUST be a borrower, while the remainderman (who is ‘guaranteed’ to receive the property) is optional as a borrower.  Although, both must sign the security instrument.  This makes enough sense.  Whereas, B2-3-01 General Property Eligibility ‘Acceptable Forms of Property Ownership’ may be interpreted as being overly concerned about a non-borrower TODD beneficiary that may or may not receive the property upon the current owner’s passing?  The only way I can reconcile the two provisions is if the refi borrower contemplated under B2-3-01 is the TODD beneficiary and not the current title holder.



Daniel L. Hembree

The Hembree Law Firm, PLLC
21 Ave A, Suite 1
Snohomish, WA. 98290
www.snocolegal.com<http://www.snocolegal.com/>
(360) 863-3185 - Office
(360) 243-0606 – Fax

CONFIDENTIALITY: This e-mail and its attachments are confidential and may be protected by the attorney/client privilege, work product doctrine, or other nondisclosure protection. If you believe that it has been sent to you in error, you may not read, disclose, print, copy, store or disseminate the e-mail or any attachments or the information in them. If you have received this communication in error, please notify me immediately by reply to this communication or by calling 360.863.3185.  Thank you.

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Zack Hofstad
Sent: Wednesday, November 4, 2026 12:25 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] TODD and Refinancing issue

I just heard from a past client that their refi is being held up due to a TODD he recorded a few years ago.

The lender sent me the following information from Fannie Mae, which states in the middle of the page that TODDs will prevent loan eligibility because they allow for the current owner of the property to transfer ownership without the consent of the named beneficiary on the TODD.

https://selling-guide.fanniemae.com/sel/b2-3-01/general-property-eligibility

This was news to me.  Has anyone faced this issue, and is there anything to be done besides recording a revocation of the TODD, closing on the refi, and then recording a new TODD (which is the lender's suggested plan of action)?

--
Zack Hofstad
Hofstad Law
4305 Lacey Blvd SE
Lacey, WA 98503
phone/fax:  360.515.7879

**This is a transmission from the law firm of Hofstad Law, Co., and may contain information which is privileged, confidential, and protected by the attorney-client or attorney work product privileges. If you are not the addressee, note that any disclosure, copying, distribution, or use of the contents of this message is prohibited. If you have received this transmission in error, please destroy it and notify us immediately at our telephone number 360.515.7879**
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20261104/d6c14c83/attachment.html>