I have the Durable Power of Attorney for my parents, who are age 83 and 73.  They own their home.  I am considering applying for a Reverse Mortgage for them.  What do I need to do?

This is a great question, and you picked a perfect time to ask it.  It is much better to find out what you need to do with a Power of Attorney (POA) before you get started than to figure it out as you go along.  HUD has some guidelines for using a POA; knowing them in advance is extremely helpful.  Firstly, let me print the HUD requirements on the use of a POA straight from their manual:

POWER OF ATTORNEY GUIDELINES

1. Borrowers with legal competency:
   1. All borrowers must sign the initial and final application (1009 & HUD 92900A )
   2. For a legally competent borrower, a POA is permitted to sign all application and closing documents
2. Borrowers lacking legal competency:
   1. Only competent borrowers may sign the mortgage loan application.
   2. Court-appointed conservator or guardian may execute any necessary documents, including the mortgage loan application.  The lender must provide evidence that the conservator or guardian has the authority to obligate the borrower.
3. An “agent” or “attorney, in fact,” holding a durable power of attorney specifically designed to survive incapacity and avoid the need for court proceedings, incapacity and avoid the need for court proceedings, may execute any necessary documents, including the mortgage loan application.
4. (1) To be valid, a durable power of attorney must be prepared when the “principal” is competent to understand the nature and significance of the instrument.
   1. (2) The durable power of attorney must comply with state laws regarding signatures, notarization, witnesses, and redecoration.
5. Closing Documents – Power of attorney (durable or otherwise) may be used for closing documents.  Any power of attorney must comply with State law and allow the Note to be legally enforced in that jurisdiction.
6. Counseling Session For borrowers lacking legal competency, the counseling session may be conducted with an “agent” or “attorney in fact” holding a power of attorney or with a court-appointed conservator or guardian.

HECM Guidelines for Legally Competent Borrowers Using a Power of Attorney

For a legally competent borrower, a durable Power of Attorney is permitted to sign all application and closing documents, including the HECM counseling certificate, Form 1009, and HUD-92900A.

Requirements include:

1. Identification: A valid government-issued photo ID for both the borrower and the POA.
2. Compliance with CIP: Adherence to any state Customer Identification Program (CIP) requirements for financial transactions at the time of application and by the Settlement Agent at the time of closing.

HECM Guidelines for Incompetent Borrowers Using a Power of Attorney

For borrowers who are legally incompetent, specific guidelines must be followed to ensure the validity of the Power of Attorney (POA) and the smooth completion of the reverse mortgage transaction.

Determining Competency at the Time of POA Execution:

1. Onset of Illness: The physician’s stated date for the onset of the illness must be after the date of the POA.  This confirms the borrower was competent at the time the POA was executed, witnessed, and notarized, making the POA valid.
2. Physician’s Documentation: If the physician’s date for the onset of the illness is before the date of the POA or if the original physician can no longer be contacted (due to death or retirement), the borrower’s current physician must have received the borrower’s medical records to write the required letter attesting to the borrower’s competency at the time of the POA signing.
3. Court-Appointed Conservatorship: If the current physician cannot provide the necessary attestation, a court-appointed conservatorship or guardianship will be required to complete the reverse mortgage transaction.

Preparation and Communication:

• Advance Review: Borrowers and their families should review their circumstances with their loan originator in advance to ensure a clear understanding of the requirements and to facilitate a smooth transaction.
• Documentation: When all documentation is handled correctly and available, completing a reverse mortgage with a POA can be straightforward.  However, knowing the requirements in advance, ensuring the information is readily available, and being prepared for the alternatives is crucial.

We encourage proactive communication and thorough preparation to avoid potential delays and complications in the reverse mortgage process.

POA FAQs

ARLO recommends these helpful resources: 

• Yes, You Can Put a Reverse Mortgage in Your Family Trust.
• Reverse Mortgage Attorney Asks: Laws of Survivorship