FHA Loan being called due for quitclaiming the deed?

Question

I was just talking with a commercial lender about some qualifications for purchasing a commercial investment. He mentioned offhand that he has seen a few times with smaller properties that have an FHA loan, where the owner quitclaims the deed over to an LLC, and this triggers the due on sale clause in the loan. Have you guys ever experienced this or heard about it? I have a quitclaim deed drawn up right now and am waiting to sign it to transfer the deed out of my name and into the LLC. What are your thoughts, experiences and opinions on this?

Wayne Brooks · Answer

You will absolutely not get pe mission for the transfer, as FHA only lends to individual, owner occupants.  The transferring to Ann LLC is a violation of the due on sale clause on all FHA and conventional loans.  If they catch it or not is the issue.  They usually catch you when you change/add the name on the insurance policy, which you'll need to do to be covered.

Account Closed · Answer

@Blake Elder

On a sidenote, using a deed of that nature will  not convey your existing title insurance to the LLC     You should use a grant or warranty deed     They are the same thing just a different name

I could be wrong on this but you may want to look into it

Furthermore I don't think there's any more cost associated with the grant deed

I guess you could always talk to the person who gave you title insurance

Account Closed · Answer

That is a technical default. If you intend to continue to guaranty the debt after the transfer, I am sure the servicer will help you get approval for the transfer.

Max Matrin · Answer

Quitclaim deeds are a very common type of legal document that deals with the rights associated with a property. The forms are commonly used for divorce or joint mortgages. While you may be considering signing a quitclaim deed, you need to fully understand what you are signing before you do.

Blake Elder · Answer

Thanks for the advise @Wayne Brooks, @ J Beard, @ Richard Dyas,

So everyone who owns a rental with an FHA loan just holds it in their name? Interesting.....

Jeff B. · Answer

You need to check with the county recorder's office on how-to.

(CAVEAT: personal opinion, no legal standing)

In Calif, I used a PCOR(preliminary change of recording) and

• show sale price 0
• taxes 0
• purpose:  Change of Vesting

The QC was then declared Grantor, Mr & Ms xyz, Grantee, "ABC, LLC"

Also worked for vesting into Living Trust.

FHA Loan being called due for quitclaiming the deed?

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