Flagstar Bank & LLC Transfer

[Steve Mitrano]

Anyone have any experience with transferring a Flagstar Bank mortgage into an LLC? I've had people tell me not to worry about it and to just do it, and I've had other people say the bank will call the loan due. My lawyer told me to send the bank a letter notifying them that I'll be transferring a title, but I've had other people tell me to call the bank. I figured calling would be easier, and they said I can't transfer the title or they will call the loan due. I'm just wondering if anyone with a Flagstar loan has done this in the past without any issues?

Otherwise, what are my options? Refinance into an LLC?

Thanks in advance!!

[Matthew McNeil]

Some of the advice you're getting here is not entirely accurate.  

Flagstar may exercise the "due on sale" clause if the name(s) of the buyer are not the same name(s) as the members identified as the owners of the LLC. For clarity; as with a trust, lenders do not exercise the "due on transfer/sale" clause when real property is transferred to the SAME individuals in an official capacity (e.g. Joe and Jane Smith as trustees of Smith Trust). Typically, the same applies to LLCs where you and your spouse are sole members (single or multiple member LLC). Regardless, you should first talk to your lender and tell them exactly what you’re planning and get their approval. If they say "No" then ask them to support that with documentation to avoid a boiler plate response.  And, @Steve Vaughan is correct; use a Quitclaim.

Next is to check with the Title Company regarding the Title insurance. Generally, the coverage of the policy will state; “The coverage of this policy shall continue in force as of Date of Policy in favor of an Insured after acquisition of the Title by an Insured or after conveyance by an Insured, but only so long as the Insured retains an estate or interest in the Land, or holds an obligation secured by a purchase money Mortgage given by a purchaser from the Insured, or only so long as the Insured shall have liability by reason of warranties in any transfer or conveyance of the Title.” Again, as with the question regarding the lender mentioned above, its best to ask your Title company if the insurance coverage remains intact if the asset is transferred.

Hope that helps.