Fannie Mae recently issued new restrictions on the use of power of attorney (see bulletin details). As a result, these new restrictions will apply to virtually every real estate transaction.
One important restriction is that if you are doing a cash-out refinance, you cannot use a power of attorney. There are no exceptions to this rule.
If you are doing a non-cash-out refinance or a purchase, you will need to satisfy these key requirements in order to use a power of attorney:
1. Prior to closing, the Principal (the person not attending the closing and appointing the Attorney-in-Fact) must provide the title company and lender with a written statement detailing the reasons he or she cannot attend the closing.
2. If no borrowers will be present at closing, the Attorney-in-Fact (the person signing on behalf of the Principal) must be the Principal's relative or Attorney-at-Law. A "relative" is defined to include a fiancé, fiancée or domestic partner of the Principal.
3. If at least one borrower will be present at closing, the Attorney-in-Fact signing for the absent borrower(s) does not need to be the Principal’s relative or Attorney-at Law. So, for example, if an unmarried couple is buying a house together, and only one of them can be present at the closing, it would be permissible for that person to be designated as the Attorney-in-Fact for the absent Principal,
4. The Attorney-in-Fact cannot be:
- a real estate agent with a financial interest in the transaction or any person affiliated with such real estate agent;
- a title company providing the title insurance policy or any affiliate of such title insurance company, or any employee of either such title insurance company or any such affiliate;
- the lender to the transaction, any affiliate of the lender, any employee of the lender, the loan originator, the employer of the loan originator, or any employee of the employer of the loan originator
An exception to the above restrictions is if the real estate agent, title company employee, or lender is a relative of the borrower. (This applies in cases where use of POA is allowed, so not in the case of a cash-out refinance.)