I just read an article recently that stated that Freddie Mac will not purchase a loan that has been under an LLC's ownership within the past 6 months. Is this true? If so, how will this affect investors?
If it is not too much to ask, can you give us your source for the article?
Sure, its the June 19, 2008 Realty Times, "Holding Property in an LLC Just Got Tougher" by Diane Kennedy
"Freddie Mac, one of the two largest underwriters of conforming loans on the secondary market, have changed their internal rules to state that they will no longer refinance a property that has been inside of a Limited Liability Company (LLC) for any time within the past 6 months."
Here is the link to the article:
I read the article. Ms. Kennedy is in tax strategy planning. In a lot of ways I believe the article is a slightly veiled attempt at using trust funds to protect assets. This is an age old argument that many sophists have poured plenty of rhetoric upon.
I have attended two seminars pumping this method myself (the first knowingly, the second after having been tricked into believing I was attending an educational session on financing).
As to your questions, I am not sure if Sub Chapter S Corporations are in the same boat as LLCs. If they are not, the corp. is the straight-forward answer.
It would take some more digging through Freddie's press release to determine. Let us let this thread hang for a while to see if anyone else in the know picks up on it to give us further insight.
So, per this article, I may have to have my property under an s-corp?
I know someone who has been turned down by a major bank because he is not the only one on his LLC. That's recent.
It really depends on how your LLC is structured and managed. If it is a thinly veiled alter ego of yourself, you will have lots of problems. If it is a real business with demonstrable income you are not going to have a problem.
Many builders and community developers operate as LLCs and their buyers have no problem with financing even though the builder owned it in an LLC.
Fannie, Freddie and FHA all have commercial programs and that is what you need to be asking your lender about.
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