Freddie Mac: Use of Power of Attorney

Question:

Has Freddie Mac recently changed its requirements for use of a Power of Attorney?

 

Answer:

Yes. A lender must comply with Freddie Mac’s updated Power of Attorney (“POA”) requirements when using a POA to close a mortgage with an application date on or after January 4, 2021 Per Freddie Mac’s new guidelines, a POA may only be used when:

  • There is an emergency event (i.e., a medical emergency or natural disaster) preventing the borrower from executing the requisite documents in person, by electronic signature or through other alternative electronic means (i.e., remote online notarization, eClosing); or
  • Applicable law requires the lender to accept use of a POA.

Under no circumstances may a POA be used merely for the convenience of the parties. Further, evidence of the emergency qualifying the use of a POA must be included in the mortgage file whenever a POA is used. If the acceptance of a POA is required by law, the lender must include a written statement that explains the circumstances in the mortgage file and deliver a copy of the statement to the Document Custodian with the POA.

The person acting as Attorney-in-Fact must:

  • Have a familial or fiduciary relationship with the borrower;
  • Be an individual employed by the title insurer underwriting the title insurance product insuring the mortgage; or
  • Be an individual employed or engaged contractually by the title agency issuing the title insurance product for the mortgage and closing the transaction, but only if the title insurer has issued a closing protection letter relating to the transaction (or has similar contractual indemnity to the lender and it’s assignees) for such policy issuing agent.

Neither the seller of the property in a purchase transaction, nor the lender’s employee is eligible to be an attorney-in-fact under a POA. The borrower may execute the POA using an electronic signature. The POA must be executed by the borrower prior to its use by an attorney-in-fact.

After the lender delivers the finalized Closing Disclosure to the borrower but prior to closing, an employee of the lender or settlement agent must explain and discuss the terms of the mortgage and use of the POA with the borrower to confirm that the borrower understands them. This discussion must take place in person, telephonically, or using a video conference system and must be memorialized in an acknowledgment by the borrower of his or her understanding of the terms of the mortgage. The acknowledgment (i) may be in writing or in a recording of the telephonic or video discussion, (ii) must be retained in the mortgage file, and (iii) must be made available to Freddie Mac upon request. If the discussion occurs using a telephonic or video system, a transcript of the recording or the borrower’s written acknowledgment of the content of the discussion may substitute for a copy of the recording itself in the mortgage file.