[WSBAPT] TODD and Refinancing issue

[Zack Hofstad]

Inge:  That's a good idea, I'll look into it.

Daniel:  You and I are on the exact same page, and I tried to explain how
the TODD shouldn't affect any of this as the TODD beneficiary 1.  Isn't a
borrower because they have no present interest in the property, and 2.  May
not actually obtain ownership of the property, and has no legal right to
the property unless they jump through the necessary hoops once the owner
dies.

The thing that really doesn't make sense to me is why Fannie would be at
all concerned about the rights of a contingent beneficiary.

Acceptable Forms of Property Ownership

Title to the property must be held as fee simple (which may include title
held in a life estate), leasehold estate, or as a co-op form of ownership.
(See B2-2-01, General Borrower Eligibility Requirements
<https://selling-guide.fanniemae.com/sel/b2-2-01/general-borrower-eligibility-requirements>
B2-3-03,
Special Property Eligibility and Underwriting Considerations: Leasehold
Estates
<https://selling-guide.fanniemae.com/sel/b2-3-03/special-property-eligibility-and-underwriting-considerations-leasehold-estates>;
and B4-2.3-04, Loan Eligibility for Co-op Share Loans
<https://selling-guide.fanniemae.com/sel/b4-2.3-04/loan-eligibility-co-op-share-loans>,
for additional information.)



*Note:* Life estates satisfying the requirements described in B2-2-01,
General Borrower Eligibility Requirements
<https://selling-guide.fanniemae.com/sel/b2-2-01/general-borrower-eligibility-requirements>,
are often chosen as a means to avoid probate. However, similar arrangements
do not qualify as life estates for loan eligibility purposes if:

   - the named successors under such arrangements do not have vested and
   irrevocable property rights in the subject property, such as with "lady
   bird deeds", or
   - the current holder of the property can, before their own death,
   transfer full ownership of the subject property to a third party without
   the approval or consent of any contingent beneficiaries, such as under
   typical statutory "transfer on death deeds."



On Wed, Nov 4, 2026 at 12:24 PM Zack Hofstad <zack at hofstadlaw.com> wrote:

> 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 <(360)%20515-7879>
>
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