COMPLIANCE HOT TOPIC

Fannie Mae: Use of Power of Attorney

Question:

Has Fannie Mae recently enhanced its requirements for use of a Power of Attorney (“POA”)?

Answer:

Yes. Fannie Mae’s guidelines for POAs in a purchase transaction now require a written record or a recorded Internet session demonstrating a meeting with the borrower to explain the Closing Disclosure after the borrower receives it.

Fannie Mae’s Lender Letter, LL-2021-03, issued February 10, 2021 indicates:

• Unless a recorded Internet session is required, a Power of Attorney may only be used in a purchase transaction with a note date on or after Apr. 7, 2020, if, after the Closing Disclosure or other closing statement, as applicable, has been delivered to the borrower before closing, an employee of the lender or settlement agent explains the terms of the loan to the borrower(s) to confirm that each borrower understands them. This discussion must take place in person, telephonically, or using a video conference system, and must be “memorialized” by an acknowledgment by the borrowers of his or her understanding of the terms of the loan. The acknowledgment may be in writing or in a recording of the telephonic or video discussion.

Fannie Mae also indicates the following:

• The purpose of the Borrower Acknowledgement provision is to confirm verbally after receiving the Closing Disclosure that the borrower understands both the key features of the loan and that the attorney-in-fact has the ability to contractually bind the borrower to the transaction, including the purchase of a home, on the same basis as if they had signed themselves;
• Key features of the loan would include such things as principal amount, interest rate and adjustment provisions (if applicable), first payment date, loan term, and initial loan payment (P&I and PITIA); and
• The conversation reflecting the Acknowledgment by the borrower(s) must be documented either in a written record created by the lender or settlement agent or in a recording capturing the conversation with the borrower. If documented in writing, there is no expectation that the borrower sign the memorialization. In either case, the lender must retain the acknowledgement in the loan file and make it available to us on request. 

Fannie Mae’s Selling Guide, chapter B8-5-05, outlines all of the requirements for use of a POA.