Refinance Conforming loans in the name of an LLC

[Jim Breedlove]

I'm looking to do a cash out refinance on my 10 conforming investment property loans, but just learned that the FNMA rules do not allow cash out refinance for investors with over 4 loans. I am considering refinancing all the conforming loans with a local community bank. The new loans would be held in the name of an LLC (of which I am the sole member), and the bank would require me to personally garantee the loans. My plan is to refinance, take some cash out, and then buy 10 more houses using conforming loans. Is this possible, or would the personal garantee requried by my local bank somehow mean that I would still have 10 financed properties in my name? I'm concerned about going through the trouble to refinance with the local bank, but still being inelgible for conforming loans - based on the 10 loan limit.

[Mark F.]

@Jim Breedlove

Hi Jim, to get around the 4 property limit, you need to work with a community bank that doesn't sell their loans on the secondary market to Fannie Mae. These types of banks, which are often called portfolio lenders, lend their own money so they can set their own lending guidelines, which means the 4 property limitation may not apply. 

Note that some banks may do both Fannie Mae and portfolio lending.

When you're calling around, be really up front that you have more than 4 investment properties and you're looking to do cash out refinances on investment property and you can't qualify under the standard Fannie Mae guidelines. Don't let a loan officer drag you through the application process to just find out later than you won't qualify because they only do Fannie loans. Being really up front will hopefully save you some time. 

Because you have residential properties, you'll be doing residential financing, which means you'll likely have to do the loans in your own name instead of your LLC. If you want to do the loans in the name of the LLC, you're talking about commercial financing, which is a completely different animal - and something I'm not familiar with.

Also, if any of the properties were purchase in the last six months, you may be able to cash out refinance with a Fannie Mae loan under the "Delayed Financing Exception". See page 207 of the Fannie Mae lending guide:

https://www.fanniemae.com/content/guide/sel022415....

Hope this helps!