Transfer title to LLC without triggering due on sale clause

[Andrew P.]

I'm closing on a house in GA. I want the house to be in an LLC but I will have to secure the conventional mortgage. My lender and his main underwriter are swearing up and down that they close loans all the time for investors who quit claim the deed to the LLC and while it does technically enable the due on sale clause the banks never call the loan. I have the ability to close the deal cash but I don't want to run into a situation years down the road where the bank decides to call it because they can make more interest after rates rise. Is this really as commonplace as they make it sound to quit claim the deed and not get called on the loan? For what it is worth I am the sole member on the mortgage and the sole member of the LLC. Thanks

[Wilson Pun]

Yes, transferring title from an individual borrower to an LLC controlled by original borrower is exempt from Due on Sale- D1-4.1-02 of the Fannie Mae servicing guide, allowable exemptions-

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).

[Andrew P.]

Awesome thank you

[Doug Trumbull]

How did this work out for you Andrew? I am concerned about the bold/underline section below: 

• 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).

Does the occupancy type need to change from "owner-occupied" to "investment property" to qualify for this exemption? 

[Wayne Brooks]

Originally posted by @Doug Trumbull:

How did this work out for you Andrew? I am concerned about the bold/underline section below: 

• 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).

Does the occupancy type need to change from "owner-occupied" to "investment property" to qualify for this exemption? 

It applies if you do it Before fulfilling the one year occupancy requirement for an owner occupied loan  If it was an investment property loan, you can do it the day you buy.