LLC with a majority interest an exception to due on sale?

[Ryan Bird]

I wanted to buy a property through a newly-formed LLC so was planning to take the commercial mortgage route. My mortgage broker told me that a conventional loan is another option as due on sale is no more an issue as long as the loan is owned by Freddiemae, which means that it's fine for me to transfer the title to LLC after the sale without triggering the due on sale clause. The exception language that I copied from Fannie mae's website (service guide) is provided below.

However, when I talked to a bank, they said they are not sure about this exception and won't allow the transfer in writing. Also, they confirmed that the mortgage documents that I'm going to sign will still have the old clause saying the mortgage is due on sale. I'm a bit confused here. Looking forward to insights here from folks who have done this recently - ie. taking conventional loans and transferring them to LLC with lenders' permission.

Here is the verbiage from Fannie mae website -

"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).

Reference/Source: https://servicing-guide.fannie...