LLC Formulation and Due on Sale Clause

[Brian Williams]

In the Latest April News Podcast the guest host stated that banks never enforce the due on sale clause if the mortgage is transferred from an individual to an LLC. In fact he stated they rarely find out because they generally don't even look at the loan again. I have wanted to do this for some time now but my lenders keep selling the private mortgage to another company. Every year I seem to be paying a different lender. If I transferred my property to my LLC wouldn't the lender find out when the loan was sold to another company and thereby trigger the due on sale clause? Thanks for any feedback.

[Bob Okenwa]

@Brian Williams

Fannie Mae has an allowable exception to the sue on sale clause for LLC's. Per Fannie Mae:

Unless the previous borrower requests a release of liability, the servicer must process the following exempt transactions without reviewing or approving the terms of the transfer:

a limited liability company (LLC), provided that

the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and

the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence).