On September 3, 2025, Fannie Mae issued a Selling Guide update (SEL-2025-07) that will permit borrowers to hold title in life estates. Fannie Mae defines these as an ownership interest in which a life tenant has the right to occupy and use the property during their lifetime and the remaindermen have an irrevocable, vested, and alienable interest in the property and will obtain full ownership upon the life tenant’s death. Fannie Mae excludes revocable life estates created by instruments such as “Lady Bird Deeds” (sometimes called “enhanced life estates”) and transfer on death deeds from their definition—these are not eligible forms of ownership. Fannie Mae will require the life tenant to be a borrower and remaindermen may be co-borrowers. The life tenant and all remaindermen must sign the security instrument as without the consent of the vested remaindermen, a mortgagee’s interest would be eliminated upon the death of the life tenant.
Full Memorandum
