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Power of Attorney

Power of Attorney (POA)

Oh boy! Here we go!  Prior to last year I can count on one hand the number of times a buyer needed to use a power of attorney (POA) at a real estate closing.  This year it seems like one out of four loan applicants ask about using a POA.

Here’s the scoop, a POA is supposed to be used for emergencies only.  Excuses like “I can’t find a babysitter” or “I don’t like the sellers” are not emergencies.

If you are located in the general vicinity I want to see original signatures on the note and mortgage, no exceptions!

One of the tiny little lines in the mortgage underwriting guidelines is that the lender must approve the use of a POA prior to closing.  All lenders want to be user friendly, but we must also make sure the note and mortgage will pass the post-closing audits, reviews and investor requirements.

There are times when a POA is appropriate, military personnel stationed overseas or out of the area is a very good example.  There are many others circumstances that are also a valid reason for using a POA.

There are least 10 obstacles that can cause a POA to be rejected by the lender.  If there is no other way to close the deal, it absolutely, positively cannot be helped, there is one safe path to follow.

First, make it known as early as possible in the process, do not wait until the very last minute, these things take time to process.  If you show up at the closing with a POA that has not been approved it is probably going to push the closing back a couple of days or longer.

Second, have the lender’s closing attorney prepare the POA.  If the attorney that is going to officiate the closing is the one that prepares the POA they cannot say it wasn’t prepared properly.  The lender is concerned about the legal status of the documents and they rely upon the lender’s title policy issued at the closing.

If you try to ignore the second suggestion it is a red flag and will prompt a more stringent review process than what you probably want to endure.  This suggestion is not in the mortgage guidelines, it is just my attempt to help streamline the process.

“My brother-in-law is an attorney and he will not charge me to prepare the POA.”

If the closing attorney and lender are not familiar with your brother-in-law the process of proving he is legit may actually cost more than preparing the POA.

A few years ago a home buyer asked me if his brother-in-law, an attorney, could handle the entire closing because he would get a good deal on the paperwork.  The brother-in-law charged the borrower $2,000 more than my preferred closing attorney would have done for the exact same deal.

If you need a copy of the 10 points a POA must meet in order to be acceptable just contact me and I’ll email a copy.

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