Wells Fargo says I can't convert my rental property into an LLC

[Briette Awbrey]

Hi everyone,

I called Wells Fargo, who services my loan & they said that the investor (Fannie Mae) won't let me transfer my house into a LLC. It was originally bought as a primary residence in 2013 but has since been a rental property for years.

When I spoke to Wells Fargo they told me that because I bought before 2016 that Fannie Mae won't allow it to be converted into a LLC - they even went to far as to mail me a follow up letter confirming this in writing (attached).

I spoke to my lender & she said "I'm not sure how they can direct how you take title post close but their letter says that the servicer of the loan doesn't allow that. Perhaps to them putting it in LLC means turning home into income generating property (when loan is taken in primary residence form) Intentions of occupancy shift all the time though."

I didn't think it would be an issue so I have already set up the LLC but HAVE NOT changed title to the LLC. I was hoping some of you could give me your insight on this... Do you think this letter is just a threat? I really need to put this investment into an LLC & don't understand why they are telling me I can't.

Thanks so much & Happy New Year ;)

Briette

[Michael S.]

Everyone needs to read what @Russell Brazil wrote again, because a lot of folks here do not appear to understand what an LLC actually is.

You can't just simply "transfer" your property to an LLC, just like your bank just won't change the name on a loan to an LLC. If you personally own the property, you essentially need to sell the property to the new LLC with a legal closing. As such, the closing would trigger paying off the old loan, and initiation of a new loan in the LLC's name, not your own. Otherwise, "transferring" your property to an LLC is worthless for legal protection in my experience, because the LLC is not truly acquiring the property from you; you're just tossing the title into another legal bucket, but not really definitively separating it from yourself.

If this still is not clear, you really should spend a bit of money to meet with an attorney and CPA to better understand what you can and can't do to create a true stand alone LLC.