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Due-on-Sale News: Fannie Mae allows transfers into LLCs

An enterprising investor on BiggerPockets discovered this useful nugget in the Fannie Mae Servicing Guide from 2017:

Section D1-4.1, Information Relating to Transfers of Ownership Applicable to All Mortgage Loans

D1-4.1-01, Determining Whether a Transfer of Ownership Is Permitted (11/12/2014)


D1-4.1-02, Allowable Exemptions Due to the Type of Transfer

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 … to …

  • a limited liability company (LLC), provided that
    • the mortgage loan was purchased or scuritized [sp] 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).

Note: 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.

Keep in mind that these servicing guidelines only apply to mortgages owned and held by Fannie Mae. So if your loan is owned by a bank, like Wells Fargo, they may not and do not have to adhere to these servicing guidelines.

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