June 16, 2011
There are many situations where borrowers, co-borrowers or family members might need to use a power of attorney to continue financial arrangements, including an FHA home loan.
Some borrowers or their family members, acting on behalf of someone who can’t represent themselves, may furnish a power of attorney (POA) to continue a financial arrangement or give final approval.
One popular use for a power of attorney is when a military member is suddenly deployed or sent on a military assignment on short notice. The purchase of a new home shouldn’t be cancelled on account of an important job requirement–if the person is willing to let someone else represent him or her using a power of attorney.
When it comes to FHA home loans, the rules state, “A power of attorney may be used for closing documents, including page four of the Addendum to the URLA and the final URLA if it is signed at closing.”
A person who had started the FHA mortgage loan process and became unable to represent themselves could use a power of attorney as described above, but the power of attorney must comply with state law, and if not a “general” version, contain language specific enough to allow the bearer to perform the functions required to close the deal.
A general POA is a very powerful document and shouldn’t be used or issued lightly. General POAs allow the authorized bearer to do a great many things in the name of the issuer–including major financial arrangements.
What a power of attorney (general or not) cannot do in most cases is initiate an FHA loan application. FHA rules are clear. “…the initial loan application may not be executed by using a power of attorney (i.e., it must be signed by all borrowers). Either the initial loan application or the final, if one is used, must contain the signatures of all borrowers.”
There are two important exceptions to this rule, which we’ll cover in our next blog post.
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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