My Servicer Experiences during LLC Transfer (Part 1)

This post chronicles my experience working through the process I wrote about in my previous Blog article How to Transfer Property to your LLC without fearing Due-on-Sale

I requested the transfer of three loans to my LLC and had vastly different experiences across three different Loan Servicers.  Two are large, publicly traded companies, and one is a smaller private company.

Loan Servicer #1

My first experience requesting an LLC transfer was perfect.  This Servicer is in the top 15 by mortgage lending volume and is a publicly traded company.  Kudos to them for how they handled everything.

I requested the transfer via their online web portal, uploaded my LLC docs, and had the approval letter in two weeks!!  It was strangely painless and incredibly easy.  I proudly filed away the approval letter, snippet below:

As you might imagine, I felt like a conquering hero after receiving this letter on my first attempt.  Predictably, it turned out my optimism was premature.

Loan Servicer #2

A private smaller company, the second Servicer was slightly more challenging.  I began the same way: request via their portal to transfer property to my LLC, then I uploaded docs.  After exchanging a few messages back and forth with their Special Loans Department, I thought we understood each other. 

Two weeks later, a large packet arrived in the mail, which contained a loan application (huh?).  During my subsequent phone call with the Special Loans Department, they asked how my loan assumption application was coming along, which made no sense because I hadn't requested any loan assumption.  In their defense, this was an uncommon request, and little bumps should be tolerated.  I clarified:

• *I am asking for a letter of approval to transfer property to the LLC
• *I'm not asking for a loan assumption
• *I'm not asking for a release of liability on the loan

Two weeks later, I had my approval letter, snippet below, which also specified a $100 'Title Transfer processing fee'.  (Fine, I'll pay you $100 to change a name in your database, which has nothing to do with my county recording)

Loan Servicer #3

Far more cringe-worthy was the third Servicer, who is one of the top three mortgage lenders by volume.  Settle in; this gets weird.

My request started like the previous ones: use the web portal to make my transfer request, with screenshots below.

Okay then....so you're going to be difficult.  I'll play along.

Let's dissect this:

"I realize your investor Fannie Mae may allow this type of transfer; however, [Company] as your mortgage servicer does not permit this."

Apparently, this individual thinks that Servicers can selectively follow certain requirements of Fannie's Servicing Guidelines...what sillyness.  Since I had logic & reason on my side, I pushed back.

The Servicer's response was...umm...pick a word: wrong, misleading, awkward, laughable?

Again, let's dissect it:

"The section of Fannie Mae's service guidelines that you referenced points out those transactions that would be classified as exempt, which enable an individual to make gifts that will become exempt from inheritance tax under certain conditions."

plus "...must seek new financing."

Look at who the sender was: 'Escalation Management Services', which means this [theoretically] isn't just your basic Customer Service Rep keyboard hero.

On the upside, hurray! - someone at the Servicer actually read the Guidelines because the word 'exempt' appears several times.  However, the 'Escalation Management Services' team clearly chose a grossly inaccurate interpretation.  In reality, this section of Fannie's Guidelines refers to property transfers that are exempt from a Due-on-Sale clause. Besides, last I checked, the IRS makes rules about tax treatment, not Fannie.

This Servicer seemed determined to prevent me from transferring title and required me to seek new financing, which I viewed as negligent and deceitful.

Time to dig in. 

Story continues on my next Post: My Servicer Experiences during LLC Transfer (Part 2)