[WSBAPT] TODD and Refinancing issue

[Inge Fordham]

Unfortunately, logic doesn’t always prevail.  Sometimes it’s more efficient (and less costly for the client) to just give them what they want.  Ten years ago, I may have had more fight in me.  I tend to be pickier these days about where I invest the energy it takes to fight.  (I also tweak my back getting out of bed in the morning - it’s so much fun getting older!)  😊


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Inge A. Fordham | Attorney
Fordham Law, PLLC
3218 Sixth Avenue | Tacoma, WA 98406
Office: (253) 348-2657 | Fax: (253) 276-0280
www.fordhamlegal.com<http://www.fordhamlegal.com>

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> on behalf of Zack Hofstad <zack at hofstadlaw.com>
Date: Wednesday, November 4, 2026 at 2:13 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] TODD and Refinancing issue

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<mailto: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<tel:(360)%20515-7879>

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