Holding Property in LLC will be Harder

Many Realtors in the area work with investors who place properties in LLCs. This is going to be a big problem come Aug. 1st, 2008.

Freddie Mac, one of the two largest underwriters of conforming loans, have changed their rules to state that they will no longer refinance a property that has been inside of a Limited Liability Company (LLC) for any time within the past 6 months.

A press release from Freddie Mac in part stated;

"We are revising our requirements for Investment Property Mortgages to reduce the number of financed properties in which a Borrower who owns more than one financed Investment Property may have an individual or joint ownership interest (including the subject property) from 10 to 4. Also, effective for Mortgages with Freddie Mac Settlement Dates on or after August 1, 2008, the Borrower on a cash-out refinance Mortgage must have owned the subject property for at least six months prior to the Note Date of the new refinance Mortgage."

The last statement is the key -- transferring title into your name before applying for a cash-out refinance will be considered a change in ownership and the 6-month trigger will apply. This change won't affect most homeowners, but it has caused a major ripple in the investor community, as has the reduction of properties an investor can own and still get Freddie Mac refinancing.

Fannie Mae is considering this change but has yet to implement. Now is a great time to go to all of your investors that may be considering refinancing in the future and have them lock in prior to Aug.1st with Freddie or get moving before Fannie changes.


Joe Phillips