March 8, 2013
Some borrowers are confused or have conflicting information about the ability to use a power of attorney on someone else’s behalf to initiate or continue the FHA mortgage loan application process. What are the FHA loan rules for this procedure?
The FHA loan rulebook, HUD 4155.1, Chapter One, states the following:
“The initial mortgage loan application may not be executed by using a power of attorney”.
That would SEEM to be the FHA’s last word on the matter, but there are exceptions to this rule, which is where some of the confusion may occur. Please note that the rule states the INITIAL application may not be executed via power or attorney but does not necessarily prohibit one from being continued in such a manner.
FHA loans do permit military members to apply for a mortgage using a power of attorney. According the Chapter Three, “A power of attorney may be used for military personnel on overseas duty or on an unaccompanied tour. The lender should obtain the absent borrower’s signature on the application by mail or via fax”.
Note that the actual borrower’s signature IS required, building in some added protection for the borrower.
The other exception listed by the FHA for using a power of attorney to initiate an FHA home loan involves what the FHA describes as an “incapacitated borrower.” Chapter Three states, “A power of attorney may be used for incapacitated borrowers who are unable to sign the mortgage application. The lender must provide evidence that the signer has authority to encumber the property and to obligate the borrower.”
What evidence is acceptable to the FHA? “Acceptable evidence includes a durable power of attorney specifically designed to survive incapacity and avoid the need for court proceedings. The incapacitated individual must occupy the property to be insured, except if it is an eligible investment property.”
In any case, when it comes to FHA loans with powers of attorney, “Either the initial application or the final, if one is used, must contain the signatures of all borrowers.”
Do you have questions about FHA home loans? Ask us in the comments section
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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