Personal guarantee on existing mortgages?

[Jeremy D.]

I'm wondering if anyone has had to give a personal guarantee on their existing debt in order to obtain more financing?

I currently have (1) FHA mortgage, (3) Freddie conforming mortgages and (5) portfolio loans through a local bank. The (1) FHA and (3) Freddie mortgages are on properties in one LLC, and the (5) portfolio loans are on properties in a second LLC. All mortgages were originated in my name, and then the properties were quit claimed into the LLC. 3 free and clear properties are also in these LLC's.

This local bank has been great to work with, but on my latest loan request they are asking for an unlimited personal guarantee of all outstanding debt held with the bank. I'm wondering if anyone has experience with these? The guarantee states that I personally will be held liable if I fall behind on one mortgage, or if they have to foreclose. I personally signed for these mortgages anyway, so I am thinking it's not that big of a deal.

It's my understanding that with the personal guarantee, the properties are basically cross collateralized. If one mortgages goes under, the bank can go after the equity in the others. It basically eliminates the LLC protection as far as what the bank can go after.

My loan agent has said that this type of guarantee is very common on commercial loans, or in my situation where i have about 800k in mortgages on 1-4 unit properties.

Any thoughts on this?