How to own in LLC and do traditional/conforming refi?

Question

In the past, you could buy a property with cash in an LLC, rehab it, and then just before cash-out refinancing, transfer it back to your personal name to conform to Fannie/Freddie guidelines and get a traditional loan, as long as the borrower was also a 25%+ owner of the LLC previously on title.  After the loan is sold off (usually 30ish days), transfer it back to LLC so the asset is held personally for as short a time as possible.  (no "due on sale" lectures plz.  Any of us who txfr title to LLCs are aware of the slight but technically possible risk).

We discovered the hard way this program is no longer available, as we're now stuck with two properties that were rehabbed in an LLC, and now that we're at the end of the 6-month required seasoning, we've been told by no fewer than 6 different lenders that we have to move the properties to our personal names, wait ANOTHER 6 MONTHS, and then refi, if we want to go with a Fannie/Freddie loan.

Any brilliant ideas to get around this/move forward without waiting another 6 months with cash tied up and (in the case of one property) a hard money loan racking up major interest?

Also, I don't like the idea of transferring these properties into my own name for six months where I lose the insulation of the LLC.  Maybe I can't have my cake and eat it too (i.e., suck it up buttercup and get a commercial/portfolio loan), but I'm going to at least try first!!!

Ready for ideas!

Account Closed · Answer

First... Gurus suggest LLCs legal specialists will tell that the protection they offer is very limited.

Second...  This post will end any possible protection you have been getting.  These kinds of transfers in and out of the LLC are a major problem.  If you google your name LLC and Garland, TX this post will show up.

Third...  The due on transfer clauses you mentioned are intentionally working with the six month rule regulations.

Forth...  Triggering the due on transfer clause and not reporting it to the mortgage company is not criminal.

Fifth...   Hiding the transfer from a mortgage company, Fannie or Freddie is criminal.

Marty Johnston · Answer

@Ryan Johnston, Great last name. @Albert Bui is correct. You really have several possibilities working with different commercial and portfolio lenders in general. There's always ways around it, (usually!) it's talking to the right people and meeting the right lenders. I have connections to lenders who can help you. PM me if you're interested and we'll chat. Good luck!

Marty J

Albert Bui · Answer

this happened because earlier in 2016 this year Fannie Mae changed their rules about a topic called "continuity of obligation."

After COB was removed, the transfer from a LLC to your personal name restarted the clock in terms of waiting another 6 months.

This only applies with properties owned 6 months or greater and to properties that were not purchased with all cash.

The ones with all cash in a LLC can still cash out into your personal name without waiting six full months in your personal name before closing on the new loan.

Regarding your situation, the best route to take for the property you're trying to take out funds from is to use a local portfolio lender or commercial portfolio lender who has flexibility to fund in LLC'S or personal names. This will allow you to keep recycling money to do your subsequent deals with out the hassles with dealing with conventional financing and the ever changing landscape. By removing these conventional Loans from your personal credit and name on title you'll have a lower financed properties count too since all properties in that are titled in and are obligated by your LLC are now considered to not count towards your financed properties count. Prior the rule was that you had to own less than 25% even despite the debt and title being in the LLC for the property to not count against you. This less than 25% rule hasn't been removed as well with the recent changes so this particular rule has made it easier for investors to free up their 10 Fannie Mae conventional loans.

Dane Ohlen · Answer

I"m doing a refinance right now on a property that is in an llc and they are doing the loan in my name now and they don't require a 6 Month seasoning.  I'm also in the process of doing another loan where Im grouping 4 properties that stay in the LLC and are a 15 year fixed at 85% LTC.  Let me know if you want me to message you the info.

How to own in LLC and do traditional/conforming refi?

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