Lender won't let me move the property to my LLC
Member since 2023 · 9 posts · 5 votes
Lender won't let me move the property to my LLC
Most Popular Reply
Lender · Deerfield, IL · Member since 2020 · 44 posts · 31 votes
2yDon't listen to these hacks, just cooperate with your original lender, by allowing them to get loan sold and securitized (90 days or less), and do yourself a favor by letting your new lender or servicer get the loan boarded onto their systems.
Once the above takes place (or you've given them their reasonable allowance of time requested), just transfer title to your LLC. Both FNMA and FHLMC permit this, under the following circumstances:
- Notes: For all such transfers affecting mortgage loans purchased or securitized by Fannie Mae on or after June 1, 2016, the transferee is not required to occupy the property
- a limited liability company (LLC), provided that
- the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and
- the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence).
- The servicer must notify the borrower that a property transferred to an LLC must be transferred back to a natural person prior to any subsequent refinance application in order to meet Fannie Mae's Selling Guide underwriting requirements.
Citation: D1-4.1-02: Allowable Exemptions Due to the Type of Transfer (04/13/2022)
Now, you will still have the Note and reporting in your name individually and will still be personally responsible for the mortgage and most likely, the manner of transfer will enable any litigant to pierce the veil of your LLC, but you'll have what you wanted, for whatever reason.
The technical permissibility of the transfer aside, as others have stated, it pretty worthless to you in the context you described.
Also, if the subject property is in California, or any other DOT state, you have some additional considerations with the conveyance.
32 Replies
- 2yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Daniel Colon:
Hi!
I just bought my 1st investment property, a brand new home with DR Horton, and used DHI (DR horton lender) for the mortgage, they told me they were going to sell the mortgage and I should wait for that before moving it to the LLC. Now PennyMac, is saying that they won't let me do the change.
I have concerns about tax benefits and liability. I rented to house within 3 weeks and they are paying to the LLC bank account and I am paying the mortgage with the LLC account.
Has anybody dealt with this? Any ideas on how to make this work without having to pay off the mortgage? I'm also looking for a tax lawyer and accountant who can help me with my taxes and this situation.
Thanks
Hey Daniel,
Have you considered doing a refi into a DSCR loan? Lenders will allow for you to close in an entity.
LuxePrivate Investments LLC 572 Reviews - Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes2y
If you want the LLC actually to limit your liability, youll need to refinance it to a commercial loan and get a commercial insurance policy.
District Invest Group545 Reviews - Member since 2023 · 9 posts · 5 votes2yI did my closing just 45 days ago and also paid additional to bring the interest down, doing another loan means closing costs again. Can't afford to do that right now. :(
Quote from @Erik Estrada:
Quote from @Daniel Colon:
Hi!
I just bought my 1st investment property, a brand new home with DR Horton, and used DHI (DR horton lender) for the mortgage, they told me they were going to sell the mortgage and I should wait for that before moving it to the LLC. Now PennyMac, is saying that they won't let me do the change.
I have concerns about tax benefits and liability. I rented to house within 3 weeks and they are paying to the LLC bank account and I am paying the mortgage with the LLC account.
Has anybody dealt with this? Any ideas on how to make this work without having to pay off the mortgage? I'm also looking for a tax lawyer and accountant who can help me with my taxes and this situation.
Thanks
Hey Daniel,
Have you considered doing a refi into a DSCR loan? Lenders will allow for you to close in an entity.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
@Daniel Colon
What are you concerned about being sued renting a new construction home?
There is no tax benefits to moving it to your LLC
7e investments53 Reviews - 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Chris Seveney:
@Daniel Colon
What are you concerned about being sued renting a new construction home?
There is no tax benefits to moving it to your LLC
a lot of worry about absolutely nothing.. no reason to retitle the property. although I think you have the right to do it in many instances. but why ? law suits thats a none starter.. tax benes ? LLC flows to you individually. credit report? mortgage is still in your name until you sell or refi
- 2ySam YinPro MemberLos Angeles, CA · Member since 2021 · 583 posts · 738 votes
@Daniel Colon
This would only make sense if the property was over a million dollars AND you paid for it in cash. Otherwise, a food insurance policy will protect you. The other benefits, or lack of, have been covered by the previous posters.
In all seriousness, I would not waste your time, money, and effort on an LLC just yet. Grow your portfolio a little longer first.
- Member since 2019 · 7k+ posts · 4k+ votes2y
don't read too much article in attorney blogs, seriously :) lol
last thing you wanna do is moving SF to LLC, just relax and go to beach somewhere. - 2yStephanie P.Pro MemberWashington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
Quote from @Daniel Colon:
Hi!
I just bought my 1st investment property, a brand new home with DR Horton, and used DHI (DR horton lender) for the mortgage, they told me they were going to sell the mortgage and I should wait for that before moving it to the LLC. Now PennyMac, is saying that they won't let me do the change.
I have concerns about tax benefits and liability. I rented to house within 3 weeks and they are paying to the LLC bank account and I am paying the mortgage with the LLC account.
Has anybody dealt with this? Any ideas on how to make this work without having to pay off the mortgage? I'm also looking for a tax lawyer and accountant who can help me with my taxes and this situation.
Thanks
Just curious. Did you get an owner occupied loan on this property with the intent of renting it out?
- 2yMichael DiossaPro MemberInvestor · RI · Member since 2023 · 191 posts · 163 votes
i'd also like to know about this. Had a Family member in a similar situation
- Member since 2023 · 9 posts · 5 votes2yNo. Is a conventional loan.
Quote from @Stephanie P.:
Quote from @Daniel Colon:
Hi!
I just bought my 1st investment property, a brand new home with DR Horton, and used DHI (DR horton lender) for the mortgage, they told me they were going to sell the mortgage and I should wait for that before moving it to the LLC. Now PennyMac, is saying that they won't let me do the change.
I have concerns about tax benefits and liability. I rented to house within 3 weeks and they are paying to the LLC bank account and I am paying the mortgage with the LLC account.
Has anybody dealt with this? Any ideas on how to make this work without having to pay off the mortgage? I'm also looking for a tax lawyer and accountant who can help me with my taxes and this situation.
Thanks
Just curious. Did you get an owner occupied loan on this property with the intent of renting it out?
- Member since 2018 · 1k+ posts · 1k+ votes2y
So, lemme get this straight: You concealed from your lender your plan to transfer the property to a commercial entity after obtaining the loan based on your personal liability. Now you want to whine that the lender says “No”
The problem is where? - Member since 2023 · 9 posts · 5 votes2yJohn, I like to keep things respectful. I think your approach to my person is lacking respect. Im not whining. Im looking for advice.
Quote from @John Clark:
So, lemme get this straight: You concealed from your lender your plan to transfer the property to a commercial entity after obtaining the loan based on your personal liability. Now you want to whine that the lender says “No”
The problem is where?
If you want to understand the situation better and “get it straight”. I told my initial lender my plan. They were ok with it. But in the process (2 weeks) they sold the mortgage to another company. And the new company is the one saying no.
Next time you want to comment, please keep things professionally and respectfully. - Member since 2018 · 1k+ posts · 1k+ votes2yUh, let’s respect the facts: your original lender told you that it was going to sell the loan and you needed to wait.
Quote from @Daniel Colon:
John, I like to keep things respectful. I think your approach to my person is lacking respect. Im not whining. Im looking for advice.Quote from @John Clark:
So, lemme get this straight: You concealed from your lender your plan to transfer the property to a commercial entity after obtaining the loan based on your personal liability. Now you want to whine that the lender says “No”
The problem is where?
If you want to understand the situation better and “get it straight”. I told my initial lender my plan. They were ok with it. But in the process (2 weeks) they sold the mortgage to another company. And the new company is the one saying no.
Next time you want to comment, please keep things professionally and respectfully.
those are the facts. I understand them perfectly.
Now you complain that your plan to ignore the original lender’s instructions was not successful.
How is that not whining? - 2yDevin PetersonBusiness MemberLender · Sarasota, FL · Member since 2022 · 2k+ posts · 667 votes
Quote from @Daniel Colon:
Hi!
I just bought my 1st investment property, a brand new home with DR Horton, and used DHI (DR horton lender) for the mortgage, they told me they were going to sell the mortgage and I should wait for that before moving it to the LLC. Now PennyMac, is saying that they won't let me do the change.
I have concerns about tax benefits and liability. I rented to house within 3 weeks and they are paying to the LLC bank account and I am paying the mortgage with the LLC account.
Has anybody dealt with this? Any ideas on how to make this work without having to pay off the mortgage? I'm also looking for a tax lawyer and accountant who can help me with my taxes and this situation.
Thanks
You will be able to move the property into an LLC with a DSCR refinance no problem.
ProAlpha Capital56 Reviews - 2yStephanie P.Pro MemberWashington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
Quote from @Daniel Colon:
No. Is a conventional loan.Quote from @Stephanie P.:
Quote from @Daniel Colon:
Hi!
I just bought my 1st investment property, a brand new home with DR Horton, and used DHI (DR horton lender) for the mortgage, they told me they were going to sell the mortgage and I should wait for that before moving it to the LLC. Now PennyMac, is saying that they won't let me do the change.
I have concerns about tax benefits and liability. I rented to house within 3 weeks and they are paying to the LLC bank account and I am paying the mortgage with the LLC account.
Has anybody dealt with this? Any ideas on how to make this work without having to pay off the mortgage? I'm also looking for a tax lawyer and accountant who can help me with my taxes and this situation.
Thanks
Just curious. Did you get an owner occupied loan on this property with the intent of renting it out?
Conventional loan means it is backed by Fannie Mae and Freddie Mac. Fannie and Freddie do owner occupied and investment loans, but they have different guidelines.
Did you tell the lender you were going to move into the property and then not move in?
- Lender · Deerfield, IL · Member since 2020 · 44 posts · 31 votes2y
Don't listen to these hacks, just cooperate with your original lender, by allowing them to get loan sold and securitized (90 days or less), and do yourself a favor by letting your new lender or servicer get the loan boarded onto their systems.
Once the above takes place (or you've given them their reasonable allowance of time requested), just transfer title to your LLC. Both FNMA and FHLMC permit this, under the following circumstances:
- Notes: For all such transfers affecting mortgage loans purchased or securitized by Fannie Mae on or after June 1, 2016, the transferee is not required to occupy the property
- a limited liability company (LLC), provided that
- the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and
- the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence).
- The servicer must notify the borrower that a property transferred to an LLC must be transferred back to a natural person prior to any subsequent refinance application in order to meet Fannie Mae's Selling Guide underwriting requirements.
Citation: D1-4.1-02: Allowable Exemptions Due to the Type of Transfer (04/13/2022)
Now, you will still have the Note and reporting in your name individually and will still be personally responsible for the mortgage and most likely, the manner of transfer will enable any litigant to pierce the veil of your LLC, but you'll have what you wanted, for whatever reason.
The technical permissibility of the transfer aside, as others have stated, it pretty worthless to you in the context you described.
Also, if the subject property is in California, or any other DOT state, you have some additional considerations with the conveyance.
- Member since 2023 · 9 posts · 5 votes2y
Quote from @John Morelli:
Don't listen to these hacks, just cooperate with your original lender, by allowing them to get loan sold and securitized (90 days or less), and do yourself a favor by letting your new lender or servicer get the loan boarded onto their systems.
Once the above takes place (or you've given them their reasonable allowance of time requested), just transfer title to your LLC. Both FNMA and FHLMC permit this, under the following circumstances:
- Notes: For all such transfers affecting mortgage loans purchased or securitized by Fannie Mae on or after June 1, 2016, the transferee is not required to occupy the property
- a limited liability company (LLC), provided that
- the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and
- the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence).
- The servicer must notify the borrower that a property transferred to an LLC must be transferred back to a natural person prior to any subsequent refinance application in order to meet Fannie Mae's Selling Guide underwriting requirements.
Citation: D1-4.1-02: Allowable Exemptions Due to the Type of Transfer (04/13/2022)
Now, you will still have the Note and reporting in your name individually and will still be personally responsible for the mortgage and most likely, the manner of transfer will enable any litigant to pierce the veil of your LLC, but you'll have what you wanted, for whatever reason.
The technical permissibility of the transfer aside, as others have stated, it pretty worthless to you in the context you described.
Also, if the subject property is in California, or any other DOT state, you have some additional considerations with the conveyance.
This is great information John! This is the kind of information I was hoping to get with my post.
I appreciate your time!
- Lender · Deerfield, IL · Member since 2020 · 44 posts · 31 votes2y
I'm glad the information is helpful.
- Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes2y
@Daniel Colon- check with the title/ escrow firm that you closed with and see if they can help with changing vesting to LLC and the ramifications ....check with new servicer and ask what they need and if you are allowed to revise the title vesting ( you cant do anything about changing the loan itself unless you refinance it ) good luck
- Investor · Member since 2018 · 46 posts · 33 votes2y
I can't speak to options available to you but one thing came to mind when reading through your post ...
If the property will be in your personal name, make sure you have an extra umbrella policy so if God forbid you get sued, you're not putting your primary residence and other personal assets at risk.
- Paradise, CA · Member since 2015 · 1k+ posts · 871 votes2y
Quote from @Daniel Colon:
No. Is a conventional loan.Quote from @Stephanie P.:
Quote from @Daniel Colon:
Hi!
I just bought my 1st investment property, a brand new home with DR Horton, and used DHI (DR horton lender) for the mortgage, they told me they were going to sell the mortgage and I should wait for that before moving it to the LLC. Now PennyMac, is saying that they won't let me do the change.
I have concerns about tax benefits and liability. I rented to house within 3 weeks and they are paying to the LLC bank account and I am paying the mortgage with the LLC account.
Has anybody dealt with this? Any ideas on how to make this work without having to pay off the mortgage? I'm also looking for a tax lawyer and accountant who can help me with my taxes and this situation.
Thanks
Just curious. Did you get an owner occupied loan on this property with the intent of renting it out?
That didn't answer the question. She asked, did you purchase the property and obtain financing with the intent to rent it out or, did you check the box on your application that you intended to occupy the home as your primary residence. You can get a conventional loan under both scenarios.
To Jay's point though (Long time no see Jay), Why?? you're on the hook if you did the loan as an individual in the event of default whether its an LLC or not (absent some anti deficiency states like California). If you are trying to do an LLC for some estate planning, just do it (Don't listen to me, I'm just giving two cents of uneducated opinion). Deed it to the LLC. Again though...why?
If you just do it, PennyMac could accelerate the loan. There are some exceptions to a lender's ability to accelerate the note if the transfer was done for estate planning purposes although that usually involves a trust, not an LLC (Again, don't listen to me, i'm not a lawyer or CPA). if they do accelerate, you are afforded the right to cure any breach subject to the acceleration so, ok, darn, you got caught...put it back. That's all that needs to happen.
- Scottsdale, AZ · Member since 2019 · 434 posts · 248 votes2y
Quote from @John Morelli:
Don't listen to these hacks, just cooperate with your original lender, by allowing them to get loan sold and securitized (90 days or less), and do yourself a favor by letting your new lender or servicer get the loan boarded onto their systems.
Once the above takes place (or you've given them their reasonable allowance of time requested), just transfer title to your LLC. Both FNMA and FHLMC permit this, under the following circumstances:
- Notes: For all such transfers affecting mortgage loans purchased or securitized by Fannie Mae on or after June 1, 2016, the transferee is not required to occupy the property
- a limited liability company (LLC), provided that
- the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and
- the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence).
- The servicer must notify the borrower that a property transferred to an LLC must be transferred back to a natural person prior to any subsequent refinance application in order to meet Fannie Mae's Selling Guide underwriting requirements.
Citation: D1-4.1-02: Allowable Exemptions Due to the Type of Transfer (04/13/2022)
Now, you will still have the Note and reporting in your name individually and will still be personally responsible for the mortgage and most likely, the manner of transfer will enable any litigant to pierce the veil of your LLC, but you'll have what you wanted, for whatever reason.
The technical permissibility of the transfer aside, as others have stated, it pretty worthless to you in the context you described.
Also, if the subject property is in California, or any other DOT state, you have some additional considerations with the conveyance.
Preach!! Do not listen to someone selling you a DSCR loan at a higher rate, lots of fees, with a prepayment penalty, etc - just to title into a LLC name.
- Investor · Santa Barbara · Member since 2022 · 28 posts · 12 votes2y
Hi there! Congratulations on your first investment property - that's exciting!
As for taxes, I'd recommend connecting with a CPA or tax attorney who has experience with rental properties held in LLCs. They can ensure you maximize deductions and handle taxation correctly.
- 2yPeter MckernanBusiness MemberResidential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
Quote from @Daniel Colon:
Hi!
I just bought my 1st investment property, a brand new home with DR Horton, and used DHI (DR horton lender) for the mortgage, they told me they were going to sell the mortgage and I should wait for that before moving it to the LLC. Now PennyMac, is saying that they won't let me do the change.
I have concerns about tax benefits and liability. I rented to house within 3 weeks and they are paying to the LLC bank account and I am paying the mortgage with the LLC account.
Has anybody dealt with this? Any ideas on how to make this work without having to pay off the mortgage? I'm also looking for a tax lawyer and accountant who can help me with my taxes and this situation.
Thanks
Think there should not be a problem, but if you do not move it into the LLC do you have other properties in there? Just want to see how much work and money it took to get that LLC started? If you did a lot for that property for one LLC, maybe talk with PennyMac's manager (this might be just something to escalate to someone else).
The McKernan Group4.957 Reviews - Member since 2024 · 1 post · 0 votes2y
@Daniel Colon Where you able to get this transfer to LLC, I am in the same boat and not yet contacted PennyMac though, trying to see how to approach them
some if the real estate attorney saying we do not have to inform lendor to transfer deed, but not sure
Join the conversationCreate a free account to reply, vote on answers and follow this thread.