Transferring Property to an LLC - Fannie Mae Approved Method

[Desmond Fielding]

I have seen a lot of posts on BP Forum regarding transferring a rental property from your personal name to an LLC and have searched the forums in the past trying to gather information. I haven't run across a post with this information, so I thought I'd share as it has helped me. I know a lot of people are afraid of the "due on sale" clause when transferring property to an LLC, but if your loan is from Fannie Mae or Freddie Mac you're able to transfer without fear of the "due on sale" clause.

In 2017, Fannie Mae updated their allowable exemptions to include transfer to an LLC. The specific language is below and I've included a link to Fannie Mae's site as well. Freddie Mac has similar language in their servicer guidebook as well. 

"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 transfer of the property (or, if the borrower is an inter vivos revocable trust, a transfer of a beneficial interest in the trust) to 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)."
https://servicing-guide.fannie....

This will not work for everyone, but hopefully this information helps a few people who do have Fannie Mae or Freddie Mac loans and want to transfer them to an LLC.