Sunday, March 8, 2009

Need a Specific Power of Attorney?

There is a new wave of residential loan refinancings currently moving through the market. We have had a number of clients who after securing their loan approval realize that they will not be in town for closing and seek to have their spouse or lawyer sign the documents under power of attorney. Usually when an individual wants their spouse to sign on their behalf, their spouse holds their General Power of Attorney (GPOA) that gives the spouse the power to act on their behalf in all sorts of matters including real property. They assume that the GPOA is sufficient for the closing, and from a legal standpoint, they are correct. A GPOA that gives proper authority does give the holder of the GPOA the legal authority to act on behalf of the spouse in the closing. All documents signed on behalf of the spouse under the GPOA would legally bind the spouse.

However, while perfectly legal to close the deal with the GPOA, most lenders will have a problem with such a move. Most lenders are unwilling to rely on a GPOA for a loan closing. Their underwriting guidelines require that a specific power of attorney (a/k/a a special power of attorney) be used in the closing. A specific power of attorney is an instrument that grants the power to act on behalf of an individual for a specific purpose. For a loan closing, a specific power of attorney will, among other things, identify the loan amount, loan number and property used to secure the loan. Also, lender underwriting guidelines specify under what circumstances a closing can be closed under a power of attorney. Usually the person that cannot be at closing can have someone sign on their behalf under power of attorney if they will be out of town on business or emergency or family business (for a funeral for example). Out of town on vacation usually does not qualify.

So when you make application for your loan, make sure that you will be available when the lender plans to close, and if you cannot be available, inform the lender and get permission to use a specific power of attorney.