New Change to Fannie LLC seasoning.

14 Replies

Wonderful news for those looking to cashout refinance a property seasoned in majority owned LLC.

I have owned a property in a single member LLC for over 1.5 years. When I went to refinance I was told the seasoning while in the LLC name didn't count towards 6 month cashout minimum seasoning. That WAS the case until yesterday.

Cash-Out Refinance Waiting Periods for Properties Owned by Limited Liability Corporations On November 8, 2017, the Servicing Guide was updated to allow a post-origination transfer into a limited liability company (LLC) under certain conditions. In acknowledgment of this change, the waiting period prior to a cash-out refinance transaction has been clarified in the Selling Guide. We will now allow time held in an LLC that is controlled or majority owned by the borrower(s) to count towards the borrower's six-month ownership requirement. Effective Date This clarification is effective immediately.

https://www.fanniemae.com/content/announcement/sel...

@Donald S.

Say you buy a property with private money and take title in your LLC (which helps prevent dod frank requirements as its a commercial loan). As of yesterday the time the property spends titled in the LLC name counts toward the 6 month seasoning requirement for cash out refinances if you are the majority member of the LLC.

Before yesterday you had to change title to your personal name and wait 6 months longer to get conventional cashout refinance.

This doesn't really change the fact that you cant close conventional loan with title in an LLC. (Although I did see some changes on that also but as a rule its not allowed).

Make more sense?

Originally posted by @Donald S. :

Sorry can you break that down dummy style for me? I was under the impression that Fannie loans couldn't be held by LLC's, only natural entities.

Previously if you purchased a property using hard money that would only lend to an LLC, you then had to title it over to yourself as a natural person for 6 months before being able to do a post-rehab cash out refinance. Now, that six month wait (during which time you presumably are paying a very high interest rate & have capital tied up) is gone.

For it to be more relevant to me here in the bay area, I'm going to be digging into jumbo loan guidelines to find one that just says "we follow Fannie on this."

thanks that makes more sense now. You be clear, if I buy with hard money in my LLC, I can refi into a conventional, can I refi and keep it in the LLC? If I'm a single member LLC.

@Marques Johnson

Does this mean properties purchased after the effective date are eligible? Or just as long as you do the refinance after the effective day? I bought some properties in an LLC back in August that I'd love to put into a conventional loan. Willing to transfer it mine and my partner's personal names.

Well in my case I was only going to be able to do a Limited cashout refinance and getting 2k max back. The rule changed and now I can get 54k. 

So yes your seasoning prior to effective date counts. I am not a mortgage officer though I am just an investor riding this roller coaster. 

The only thing that changed is that FNMA clarified what they have always allowed. I've done (and other members in our LLCs) a DO-DI, with help from the attorney closing the refinance, several times.

To see a real example: https://www.biggerpockets.com/forums/52/topics/92020-titling-your-properties-in-an-llc
Read my post and Bill Gulley's post. You could have done this 1, 5, 10 years prior. Now that it is 'official', maybe people will start doing it;) LOL!!

Originally posted by @Marques Johnson :

@Chris Martin

Not sure if you read my post. What changed was title held in LLC now count towards the 6 month cash out refinance requirement. So that is what changed on the 19th and it was perfect timing for me.

My point was that underwriting permitted this 10 years ago. I did the same thing, as did other members in my LLCs, about 5 times each. 

@Chris Martin

I don't see how what you're saying is true.  The only thing that was permitted was to change title from an entity into your personal name and then do a rate & term refinance right away.  But not a cash-out refinance, which requires 6 months of seasoning in your personal name.

The post you linked talks about due on sale clauses, which has nothing to do with this.

Some scenarios that would benefit from this:

1. Say you purchased BRRRR properties under an LLC because your hard money lender required it. Then you had to refinance using a commercial loan in your LLC because you wanted to pull out some money, but that's usually more expensive. Now you can change title to your personal name and do a cash-out refinance at the same time, allowing you to get most (if not all) or your money back and at the lowest rates.

2. Let's say you bought a flip under an LLC, like most people do for liability and tax purposes. After six months, the flip doesn't go well, and you realize you're not going to be able to sell it without losing money. But you can afford to keep it as a rental at conventional rates. Now you can change title to your personal name and do a cash-out refinance to pull out as much of your equity as possible and cash flow. Otherwise, you would have only been able to do a rate and term refinance and pay off the lender, but most of your money (down payment, rehab, etc) is still sitting in it.

Originally posted by @Nghi Le :

@Chris Martin

I don't see how what you're saying is true.  The only thing that was permitted was to change title from an entity into your personal name and then do a rate & term refinance right away.  But not a cash-out refinance, which requires 6 months of seasoning in your personal name.

The post you linked talks about due on sale clauses, which has nothing to do with this.

Wow. Because you never saw it done, it must be a lie. Interesting.  Look it up. Wake county registry. B/P 13155/1566 and 13155/1593. 

I can't help that you have  the wrong attorney. 

@Chris Martin

Thanks for the info but not what I was referring too nor relevant to the changes I am talking about.    Also like Nghi mentioned your post was inaccurate as that is not what changed nor was it what we were talking about.  So take some time to read before being condescending.

10-4 @Marques Johnson .

What you are doing is totally different. Just to clarify, the following paragraph details what I did. 

In 2003-2010, we (my members in the LLC) would buy in LLCs. We had a few. We paid cash. We fixed them up and rented them. We would refinance later (usually after 6 to 12 months) with FNMA loans. We had leases, etc., and great DTI and credit scores. At the end of the refi day, the property was still in the LLC. Our attorney did a deed-out and a deed-in to the LLC, with one closing package, with personal guarantees, and all with FNMA underwriting. I hit the 10 limit more than a decade ago, but I know others (other members) who (with same attorney) did the same thing after I was maxed out.

My apologies for posting on your topic. 

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