Selling Guide

Published October 06, 2021

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B8-5-05, Requirements for Use of a Power of Attorney (03/03/2021)

Introduction

This topic contains information on requirements for use of a power of attorney, including:

 

Overview

A power of attorney (POA) is a legal document giving one person (described below as the “agent”) the power to legally bind another person. Loans with documentation executed by an agent on behalf of the borrower under a POA are eligible for delivery to Fannie Mae if all requirements referenced in this Guide are met.

When title to mortgaged property is held by a trustee under an inter vivos revocable trust, loan documentation may not be executed using a POA granted by such trustee unless,

  • the related trust instrument expressly authorizes the trustee to use a POA to delegate powers to an agent, or

  • the agent under the POA is the borrower creating such inter vivos revocable trust.

 

General Exception to Power of Attorney Requirements

If a lender determines that it is required by applicable law to accept a POA presented by a borrower, none of the following requirements for, or limitations on, the use of a POA apply. In such cases, the lender must include a written statement in the loan file that explains that determination. Such written statement must be provided to the document custodian with the POA.

 

Eligibility Requirements for Using a Power of Attorney

Underwriting and Documentation Requirements
Eligible Transactions
  • Purchase

  • Limited cash-out refinance

Documentation Requirements An agent under a POA may sign the note and/or security instrument on behalf of a borrower (as defined in the Glossary) if all of the following requirements are met:
  • The lender obtains a copy of the POA.

  • The name(s) on the POA match the name(s) of the person on the relevant loan document.

  • The POA is dated such that it was valid at the time the relevant loan document was executed.

  • The POA is notarized.

  • The POA must reference the address of the subject property.

Note:  See  B1-1-01, Contents of the Application Package, regarding the use of a POA in completing the Uniform Residential Loan Application.

Additional Requirements
  • In jurisdictions where a POA used for a signature on a security instrument must be recorded with the security instrument, the lender must ensure that recordation has been effected.

  • If applicable law requires an original POA for enforcement or foreclosure purposes, an original must be forwarded to the document custodian.

  • If there is more than one borrower, each may execute the note and/or security instrument using a POA that complies with this section.

Ineligible Agents Unless a person described below is a relative* of the borrower, none may serve as an agent except in accordance with a listed permitted exception.
Agent Permitted Exceptions
Affiliate of lender Transaction must meet the Additional Conditions below
Loan originator
Affiliate of the loan originator
Employee of the title insurance company
Affiliate of the title insurance company or its employee (including, but not limited to, the title agency closing the loan)
Lender (or employee of lender) None
Property seller, or any person related to the property seller, including a relative or affiliate
Any real estate agent with a financial interest in the transaction (or any person affiliated with such real estate agent)

*A borrower’s relative includes any person defined as a relative in this Guide, or a person who is a fiancé, fiancée, or in a legally recognized mutual relationship with the borrower (however denominated under applicable local law).

Additional Conditions

The following are the additional conditions that must be met to qualify for a permitted exception in the table above.

  • The POA expressly states an intention to secure a loan not to exceed a stated amount from a named lender on a specific property.

  • The POA expressly authorizes the agent to execute the required loan documents on behalf of the borrower.

  • In a recorded, interactive session conducted via the internet, and to the satisfaction of the agent, the borrower must

    • confirm their identity;
    • after reviewing the required loan documents, reaffirm their agreement to the terms and conditions of the note and security instrument evidencing the transaction; and
    • reaffirm their agreement to the execution of the loan documents by the agent.
  • At Fannie Mae’s request the lender must produce a recording and other documentary media memorializing the entirety of the interactive session. Such request may be at any time during the term of the related loan. The lender must comply within a commercially reasonable time following such request and without additional expense to Fannie Mae.

  • If the agent is an employee of the title insurer or is an employee of the policy-issuing agent of the title insurer, then unless unavailable under applicable law, such title insurer must issue a closing protection letter (or similar contractual protection) for the transaction for the policy-issuing agent.

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcement Issue Date
Announcement SEL-2021-02 March 03, 2021
Announcement SEL-2019-05 June 05, 2019
Announcement SEL-2016–03 March 29, 2016
Announcement SEL-2014–06 May 27, 2014
Announcement SEL-2013–08 October 22, 2013

 

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