Freddie Mac now allowing LLC transfer (as of 10/20/2021)

[Danial Qureshi]

I just discovered that Freddie Mac recently began allowing property title transfers to an LLC after an amendment to their servicing guidelines, effective on 10/20/2021.

Until now, only Fannie had allowed LLC transfers (since 2017), with Freddie still restricting the practice officially. After this amendment, both Fannie & Freddie servicing guidelines have virtually the same language around LLC transfers where they essentially allow the transfer as long as the loan is 12 months seasoned and the controlling interest in the LLC is the original borrower.

Relevant text is posted below but here is the direct link to the relevant servicing guideline on Freddie's website:

Freddie Mac 8406.4: Additional permitted Transfers of Ownership

8406.4:Additional permitted Transfers of Ownership: 

• The transfer is to a limited liability company (LLC) or limited partnership (LP), provided that:
  • The managing member/general partner of the LLC/LP is the original Borrower. If there are multiple Borrowers, all of them must be members/partners of the LLC/LP, and at least one of them must be a managing member/general partner. If the transfer results in a permitted change of occupancy type to an investment property, such change must not violate the Security Instrument (e.g., the 12-month occupancy requirement for a Primary Residence), and
  • The Servicer notifies the original owner or natural person that the Mortgaged Premises transferred to an LLC/LP must be transferred back to the original owner or natural person prior to any subsequent refinance or modification application to meet Freddie Mac's underwriting requirements.

Hope someone can benefit from this, I hadn't found widespread mention of this on BP so wanted to share.

[Ameya Barve]

Thank you for sharing - big news indeed! I am sharing snippet of the relevant section from the Fannie Mae Servicing Guide (section D1-4.1-02), so both sections are can be found in this topic - emphasis on the LLC part is mine (Title is the direct URL link to the entire section on Fannie Mae Servicing Guide).

Fannie Mae D1-4.1-02: Allowable Exemptions Due to the Type of 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 relative of the deceased borrower (or, in the case of an inter vivos revocable trust borrower, to a relative of the individual who established the trust), as long as the transferee occupies the property;
  • the spouse, child(ren), parent(s), brother(s) or sister(s), grandparent(s), or grandchild(ren) of the borrower (or, in the case of an inter vivos revocable trust borrower, of the individual who established the trust), as long as the transferee occupies the property;
  • a spouse of the borrower (or, in the case of an inter vivos revocable trust borrower, of the individual who established the trust) under a divorce decree or legal separation agreement or from an incidental property settlement agreement, as long as the transferee will occupy the property;
  • an inter vivos trust (or, if the borrower is an inter vivos revocable trust, into a new trust) provided that the borrower (or the individual who established the original inter vivos revocable trust) will be the beneficiary of the trust and the occupant of the property 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).

    Notes: For all such transfers affecting mortgage loans purchased or securitized by Fannie Mae on or after June 1, 2016, the transferee is not required to occupy the property.

  • 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).

    The servicer must notify the borrower that a property transferred to an LLC must be transferred back to a natural person prior to any subsequent refinance application in order to meet Fannie Mae’s Selling Guide underwriting requirements.