If you are interested in closing an FHA refinance using a Power of Attorney, then there are certain rules that apply. Loans closed with the use of a Power of Attorney must comply with state law to the extent that:
- The mortgage can be legally enforced in that jurisdiction, and
- Clear title can be conveyed in the event of foreclosure.
A Specific Power of Attorney usually must be obtained so that the lender can be sure they comply with the above requirements.
Except for cases where the borrower is incapacitated (see below), the initial loan application may not be executed by using a Power of Attorney, i.e., it must be signed by all borrowers. Military personnel on overseas duty or on an unaccompanied tour are required to sign the initial application, which may be obtained by mail or fax machine.
A Power of Attorney may be used for closing documents including page 4 of the Addendum to the loan application and the final loan application.
Incapacitated borrowers unable to sign the mortgage application: Evidence must be provided giving the attorney-in-fact authority to purchase the property and obligate the borrower. This would include a durable Power of Attorney specifically designed to survive incapacity and avoid the need for court proceedings. The incapacitated individual must occupy the property.
The Specific Power of Attorney must contain the following information:
- Purpose – A clear intention to obtain a loan for purchase, construction, or refinancing.
- Property Identification – Address of the specific property.
In extreme situations, there have been instances where it was impossible to obtain a Specific Power of Attorney.
A General Power of Attorney may be used for FHA loans with the following stipulations:
- The General Power of Attorney must state the attorney-in-fact may purchase or refinance, as applicable, real estate.
- The title policy does not contain any exceptions regarding the use of a Power of Attorney.
- The initial loan application must be signed by the borrower(s) except in situation where the borrower is incapacitated.
In all states, documents executed by the attorney-in-fact must include the principal’s name, the agent’s name, and the agent’s capacity (attorney-in-fact) in the signature.
The agent’s capacity (attorney-in-fact) must be written out in its entirety, as abbreviations (AIF, POA, etc.) are not acceptable.
Additionally, the document(s) should have the same information typed or written.
Here are just a few examples of what a Power of Attorney may look like: