I am your vehicle baby...
Saturday, 28 February 2009 16:00
March, another month upon us, for many the first sighting of spring flowers, the green beer of St. Paddy’s Day, the Vernal Equinox, HUD financial statement filing shortly due for you 12/31 year enders and for some of us, the Ides of March (for those “You Tubers” http://www.youtube.com/watch?v=_EBMo8xHGNs ).


I recently reviewed a rush file with 2 interesting features:
• The Processor note indicated the purpose of the rush was “to replenish funds for continuing in home healthcare due to Borrowers’ Alzheimer’s condition”
• A “sticky note” affixed to the 37 day old POA document in the file indicated “physician’s letter of Borrower competency will follow as an e-mail attachment”
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“Ripley’s Believe It Or Not!!” I said to myself, dumbfounded as I realized I had just stumbled on to a case where a serious incapacitating disease showed signs of reversal! What do you think?


Speaking of vehicles, what an appropriate time to visit an often used, very confusing vehicle, the Power of Attorney (POA). 


By the way, I am not an attorney nor a physician. For a more detailed analysis and opinion you should engage one of these professionals as this information is for discussion purposes only.


Simply, a POA is a legal document whereby one individual authorizes another individual to act on their behalf.

In a reverse mortgage transaction, the most common uses of a POA would be in situations where:
• the borrower is mentally incompetent,
• the borrower is mentally competent, but physically incapable of signing,
• the borrower is mentally competent and physically capable of signing, but chooses to have an Attorney-In-Fact execute documents on his or her behalf.

Generally, there are 3 kinds of POA Documents:
• Durable – the Attorney-In-Fact is granted full powers to act, and in the case of a reverse mortgage transaction, to encumber the property. The “durability” is an unrestricted ability to act from execution through incapacity versus other forms which become ineffective when the Borrower becomes incompetent.
• General – the Attorney-In-Fact is granted similar wide range powers, however, lacking the durability feature, the POA document is only effective as long as the Borrower is competent.
• Specific – the Attorney-In-Fact is granted powers for a specific task or action and not wide and broad ongoing ability to act. Lacking the durability feature this document is only effective as long as the Borrower is competent and due to its nature only good for the specific task or action it was executed for.

5 key checklist words to remember when reviewing a are:
• Conformity – The POA document must conform to ALL state statutes, rules and guidelines to allow the capacity for the Attorney-In-Fact to act. Be aware that State rules and guidelines vary necessitating a complete review by several participants in the loan process. A critical review checkpoint is the title company Underwriter who will determine if the document when used to encumber the property will provide for a legal transaction in the property state. Generally, a faulted document negates all parts of the transaction.
• Competency – The loan Underwriter reviews the document for determination of Borrower mental competency and/or need for the Attorney-In-Fact based upon conditions present. Many times the Underwriter must be supported by a physician’s evaluation and statement or letter of explanation from the Borrower to arrive at a decision as to how the POA document can be used in the reverse mortgage loan transaction. Generally a faulted document or lack of form and substance of the situation and need for the document could result in restrictive use or additional conditions for use of the document. Clearly, the Underwriter is not acting as an attorney or physician, but rather the “protector” of both the Borrower and Lender interests.
• Counseling – A General or Specific POA may not be used to represent the Borrower for Counseling purposes regardless of his/her mental capacity. The same would apply for application execution purposes as well. Only a Durable POA would allow for an Attorney-In-Fact to represent the Borrower. Generally, many Lenders also stipulate that if the Borrower is competent, he/she attends counseling and, at minimum, may be requested to execute the Counseling Certificate and 1009. Incompetent Borrowers may not execute the Counseling Certificate or the Application documents.
• Closing – Generally, all 3 forms of a POA document noted may be used to execute closing documents (may vary by Lender) provided the POA document complies with all State requirements and allows for both legal Note enforcement and the subject property to be encumbered.

One last note, notice the absence of the “double C” - Compassionate Collaboration in the checklist. As an Originator, you may choose to be of the opinion that you are not a party to determining the Capacity of the Borrower, however, as the initial point of contact and “advocate” for the Borrower, your actions or lack thereof may result in a dramatic negative impact to one or more of the participants in the loan process. Ethically, you must distinguish yourself to assist the Borrower and the Lender in the transaction at all times. Your analysis and review may delay the proposed transaction until such time as a court appointed Guardian or Conservator is in place, due to the inability for the Borrower to competently execute a durable POA. The decision to do what is right and best for all parties is what affirms a professional.
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