All Forum Posts by: Ben Williams

  Selling or transferring the property is not breaking an agreement. It is activating an option for the lender to call the loan due. 

 What you just said is completely understood by all on this conversation.  The point of this thread was determining why and under what circumstances a lender would exercise this option to weigh the risk/reward/convince. 

 This is the key. Account Closed. You keep speaking about fraud but there is no fraud. One has the right  to sell their property at any time. It's the owner's decision, not the lender. It's also the lender's decision if they would like to call the loan due in full. 

@Greg H.  that makes a lot of sense. It does seem more of a template process and any actual thought being put into it. Except for in cases like Russell Brazil. 

@Account Closed banks wouldn't want to take out the phrase because it gives them more options. But just because an option exist doesn't always make it the most profitable. I'm trying to get in the mind behind  of a bank/lender actually using the  policy to call the loan due. 

@Account Closed I am also assuming in this question that the wording of the Loan says that the lender has the RIGHT to call the loan due. I'm just trying to figure out why and in what circumstances they would do so. 

A person who buys a home with a secured loan also has the RIGHT to transfer it whenever they please. 

@Account Closed the reason for the poll is that so many very educated and experienced investors and lawyers tell me this is done a lot and the loan never (or in some peoples cases rarely) gets called due. Remember, this is same person owning the original property as well as the LLC which would be becoming the new owner.

I can understand Fannie and Freddie qualified loans required to be made to individuals because LLCs can file bankruptcy and shut down with less consequences than an individual. When the loan is tied to a person, a real person can be held accountable. But if a property is transferred to an LLC AFTER the loan is finalized, the loan itself is still tied to the individual and still secured by the property. No risk has changed or rules broken between any relationship between the bank, the Fannie/Freddie, or the owner/borrower. Furthermore, the use of the property is unchanged as a rental/investment. Far as I can tell, the only thing that has changed is that the individual is more protected from liability.

So all that being said (and if accurate) only @Russell Brazil's answer makes any logical sense to me for a bank deciding to call a loan due for a title transfer to an LLC owned by the same individual.

to clarify general  question so far...

I'm wondering on actual experience primarily. I'm not saying I will notify the lender I'm not talking about being devious or concealing anything. I'm talking about a transfer of a property to an LLC. I'm aware the bank does indeed have the right to call the loan due. The question is, will the bank do so, and if yes, why? Because on the surface, so long as the loan is still paid on schedule, the bank is still getting the return they forecasted. Also the loan payment is still ultimately the responsibility of the same individual and secured by the same property. The ONLY thing that changed for anyone is extra liability protection for the owner.

@Russell Brazil gave the most technical logical for a bank to call the loan due. 

@Chris M. Have some additional real world insight. 

What are others' actual experiences?

@Russell Brazil Could you explain why a rising interest rate would entice banks to enforce the due on sale clause? Would I be right in thinking that it would free up funds to lend at a higher interest rate?