Signing by Power of Attorney?

There are many situations where a Power of Attorney is necessary and extremely helpful.

And if you have a client who is signing by Power of Attorney they may find themselves in situations of extenuating circumstances. Some of these include but are not limited to:

When elderly parents can’t get in to see a lawyer
If a commercial fisherman is out at sea who and can’t get back to land before closing
There are unforeseen accidents that make it impossible for a borrower to travel

As long as the intentions of the parties are pure, a Power of Attorney can be a game changer. However, all that power can have a dark side.

The potential for abuse is also very real and some devastating instances of fraud have been perpetrated in Canada by the misuse of a Power of Attorney. As a result, lenders, lawyers, and title insurers often flag these transactions. While these deals may still proceed, it is usually with greater scrutiny. And with the extra oversight, these deals often come with longer timelines to close.

There are some considerations for brokers when the client has one or more borrowers who need to sign by Power of Attorney:

Obtain a copy of the Power of Attorney up front and ask if an original is available. It may be necessary later.
Advise the lender up front that the client will be signing by Power of Attorney. Many lenders have strict policies and you’ll want to ensure that your lender will consent to this. You don’t want to surprise the lender with this just before closing.
Make sure you have a clear understanding of the use of funds. For example, if the person under the Power of Attorney is using the funds for their own benefit, this could be problematic.
Read the Power of Attorney. You don’t have to be a lawyer to be able to see that it doesn’t contain any restrictions, that it properly names the parties, and that it’s signed.
Send a copy of the Power of Attorney to the lender with the application. Include an explanation as to why the borrower can’t sign in person.
Brace your borrower for additional time to close and the potential for more questions about it. The lender may send it on to their Title Insurer for review and that may trigger further questions. The lender may also send it to their lawyer for review and approval.
Lastly, brace your client for a worst-case scenario; namely that signing by Power of Attorney may not be acceptable and the borrower will have to sign in person.

For mortgage brokers, it is important to know that clients who sign by Power of Attorney aren’t necessarily a deal breaker for lenders. It may just simply mean that the deal will come down to finding a lender that is comfortable with the use of Power of Attorney and that this may extend the timeline.