September 11, 2017
Can I use a power of attorney when it comes time to close my FHA loan? That may not be a common question per se, but for those this issue affects, the answer can affect how the entire closing process is handled.
There are many reasons why a power of attorney might be needed to close a legally binding financial transaction such as an FHA mortgage. A borrower may be called away for an urgent work or family need, military duty could prevent the borrower from being physically present, injury or illness, etc.
FHA loan rules address the power of attorney issue in HUD 4000.1, which begins on page 345 by stating:
“A Borrower may designate an attorney-in-fact to use a Power of Attorney (POA) to sign documents on their behalf at closing, including page 4 of the final HUD-92900- A, HUD/VA Addendum to Uniform Residential Loan Application and the final Fannie Mae Form 1003/Freddie Mac Form 65, Uniform Residential Loan Application (URLA).”
That said, FHA loan rules indicate that some parties to the loan, certain parties of the transaction cannot be allowed to act as an “attorney-in-fact” via a power of attorney:
“Unless required by applicable state law, or as stated in the Exception below, or they are the Borrower’s Family Member, none of the following persons connected to the transaction may sign the security instrument or Note as the attorney-in-fact under a POA:
-Mortgagee, or any employee or Affiliate;
-loan originator, or employer or employee;
-title insurance company providing the title insurance policy, the title agent closing the Mortgage, or any of their Affiliates; or
-any real estate agent or any person affiliated with such real estate agent.”
Note the exception mentioned above, “unless required” by law. There are other exceptions:
“Closing documents may be signed by an attorney-in-fact who is connected to the transaction if the POA expressly authorizes the attorney-in-fact to execute the required documents on behalf of a Borrower, only if the Borrower, to the satisfaction of the attorney-in-fact in a recorded interactive session conducted via the Internet has:
-confirmed their identity; and
-reaffirmed, after an opportunity to review the required mortgage documents, their agreement to the terms and conditions of the required mortgage documents evidencing such transaction and to the execution of such required Mortgage by such attorney-in-fact.”
FHA loan rules include the use of electronic signatures on certain documents, which may affect how or when you may wish to use a power of attorney in your home loan transaction. We will cover electronic signature requirements in another blog post.
If you are unclear on how these rules may apply to your transaction, speak to a loan officer who can advise you on the rules and requirements in your state and/or that specific financial institution.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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