Powers of Attorney
The person who grants power to an agent is called the principal, and the principal may use either a general power of attorney or special power of attorney to give his agent powers. A general power of attorney gives the agent power to accomplish anything the principal could do, whereas a special power of attorney gives the agent narrower powers, such as the power to accomplish a specific real estate transaction. Either power of attorney can be durable – effective even if the principal is incapacitated – or non-durable. Non-durable powers of attorney give the agent authority as long as the principal is not incapacitated but terminate after incapacity.
When you give your agent authority to obtain a mortgage or home loan, you will typically give him power to do whatever is necessary to carry out that authority. Your agent may need to negotiate terms for the loan, sign loan documents, or take care of other loan preparations. When your agent obtains a mortgage or loan on your behalf, the agent is not personally liable for the debt, but you are.
Depending on its wording, a power of attorney can be used to obtain a reverse mortgage. Reverse mortgages allow a homeowner to receive payments from a lender based on the homeowner’s equity in the property. Reverse mortgages are primarily obtained by elderly persons, and a power of attorney allows someone else to sign the documents for the elderly principal. When a principal is incapacitated, the agent may seek to obtain a reverse mortgage to raise money to provide home care or pay for other care expenses.
A power of attorney must be signed by a principal who is competent when the document is executed, even if he later becomes incapacitated. Since many of the elderly are especially vulnerable to influence and pressure, reverse mortgage lenders may require proof of competency such as a letter from the principal’s doctor stating that the principal was competent at the time the power of attorney was executed. This ensures the agent’s authority is legitimate and that the principal knew what he was doing when he gave the agent this authority.