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Fannie Mae & Freddie Mac – Translating Documents In Another Language
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Question:
If someone purchases an investment property with conventional financing and later deeds it to their LLC, would that transfer trigger a due-on-sale clause?
Answer:
Both Fannie Mae and Freddie Mac allow a borrower to transfer title to an LLC after closing without triggering a due-on-sale clause.
References:
Showing Fannie Mae details, but Freddie Mac is the same:
D1-4.1-02, Allowable Exemptions Due to the Type of Transfer (08/13/2025)
This topic contains information on allowable exemptions due to the type of transfer. The servicer is responsible for ensuring the transfer of ownership complies with applicable law, including with respect to the preemption of due-on-sale prohibitions.
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 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).
Note: The servicer must notify the borrower that a property transferred to an LLC must be transferred back to a natural person in order to qualify for a refinance loan and to meet Fannie Mae’s Selling Guide underwriting requirements.
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