RE: Freddie and Fannie (Conventional) Loan Quota

[Sean Hou]

Hi BP Friends,

Currently I have 4 small investment SFHs under my name (each has a conventional loan). I am thinking of transferring these properties to my single member LLCs and getting them refinanced through portfolio loans (from a portfolio lender who keeps all loans in house). Would that free up 4 of my conventional loan quota?

I thought the answer is Yes until I listened to a podcast recently and a speaker said the answer would be No because SMLLCs flow everything (including the 4 portfolio loans) to me.

I haven’t reached out the 10 conventional loans yet, but am planning on getting there in the near future by getting higher fair market value SFHs using the lower rates offered by conventional loans.

Thanks for your insights!

[Joe Splitrock]

@Sean Hou the 10 loan limit is not 10 loans, it is actually a "10 financed properties" which means any property that a loan (or multiple loans) secured against it. For example if your primary residence has a conventional loan and HELOC, that only counts as 1 financed property even though it is two loans. If your personal home has no conventional mortgages, but a HELOC secured against it, that is 1 financed property. If you have a business loan that is personally guaranteed, that could be counted too. Assuming you are just cosigning for your business, that may not show up, but it depends on how the bank is reporting it.

I have run up against the 10 financed property limit a couple times. Last time I did two cash out refinances, then took the cash out to pay off two other loans. That allowed me to keep the benefits of low rate and long term lock of conventional, while freeing up two financed properties. 

I am not sure how close you are to the ten limit, but also be aware they increase cash reserve requirements as you scale so that is another consideration.