Lender won't allow transfer of ownership to LLC

[Reid Simonton]

Hi all,

This is my first post on BP - I looked around for similar questions/answers and couldn't find a good match so I figured I'd go ahead and post; hopefully this is the correct forum for my question. First, a little background.

Last year my wife and I purchased a single-family home as an investment property, as a rental. Between the time that we put down or earnest money (this was a new construction home) and when we closed I established a LLC with the intention of transferring ownership of the property to the LLC after we closed on the house. Along with setting up the LLC I also established business checking & savings accounts in the LLC's name, as well as opening a line of credit (business credit card), again in the LLCs name. So far so good.

We closed on the house, a renter moved in, and from day one all income received for the rental has been direct-deposited to the business checking account I opened, and remains there. Never any money in our out insofar as our personal funds (this is a bit off topic, but thought I'd include it for completeness).

Anyway, the note for the property ended up with PennyMac. I reached out to them by phone to request that the property be transferred to the LLC via a quit-claim deed. The rep at PennyMac told me this was not something they allow, but that I was welcome to appeal that decision by faxing a written request to them, which I did. Although it took quite a while before I received a response, when I did it said the same - that transferring ownership of the property to a LLC was against their investors' policy and that they would not be willing to do so.

So here we are roughly 10 months later, and I feel like I'm in limbo here and not exactly sure what to do. I have this LLC set up along with the bank accounts and all money for the rental is going through (well, to) that channel...meanwhile I have PennyMac telling me that they won't allow us to transfer ownership of the property to the LLC.

I'm concerned what this means as far as tax implications for the rents that we've received, and of course I'm wary of the fact that we own this rental in our names and with no protection of any type that a LLC might/would otherwise afford us.

Sorry for the very long post. My question is of course, what can I do here? I considered refi'ing the property after one year in an effort to move the note to another lender who would be more willing to work with us, but have been told that there's no way to control where the note ends up, and it's possible that it could end up back with PennyMac.

What are our options, if any?

Thanks very much for your time.

Reid