Deciphering the VA Lender’s Handbook Chapter 9 Part 7
For active-duty servicemembers stationed away from where they are wanting to live, or for any other veterans who would feel more comfortable having a savvy son or daughter arrange the details of their home loan, being able to give someone power of attorney to apply for and close on their home loan can be a great boon. The VA’s official policy is that a veteran is allowed to use an attorney-in-fact (someone acting as the veteran’s attorney, even if they are not a licensed attorney) to sign any documents necessary to getting a VA loan. From the Handbook: “VA will allow a veteran to use an attorney-in-fact to execute any documents necessary to obtain a VA-guaranteed loan. This enables active duty servicepersons stationed overseas, and other veterans who cannot be present to execute loan documents, to obtain VA loans.”
That’s far from the end of the story, however. The manner in which the veteran has granted the power of attorney to the individual must be valid and “legally adequate”. Whether the veteran grants general or specific power of attorney, they need to make sure that the manner in which it was granted complies with state law enough that the mortgage can be legally enforced in that jurisdiction and a clear title can be conveyed in the event of a foreclosure. As long as the power of attorney has been legally granted, the attorney-in-fact can apply for a Certificate of Eligibility on behalf of the veteran and initiate the loan processing on their behalf as well. The VA allows for the entire loan process to be done by an attorney-in-fact if the veteran desires it. However, the VA does have some requirements to make sure that the veteran is 100% aware of what he or she is being agreed to.
The VA requires that some form of written consent by the veteran be provided when using an attorney-in-fact. The reason for this is that there are specifics about the VA loan program that it is important to make sure the veteran understands that he or she may not learn except through the VA loan application process. This requirement can be satisfied one of two ways. Here is what the Handbook outlines as the two possibilities:
- the veteran’s signature on both the sales contract and the Uniform Residential Loan Application, as long as the veteran’s intention to obtain a VA loan on the particular property is expressed somewhere in those documents, or
- a specific power of attorney or other document(s) signed by the veteran, which encompasses the following elements:
- Entitlement– A clear intention to use all or a specified amount of entitlement.
- Purpose– A clear intention to obtain a loan for purchase, construction, repair, alteration, improvement, or refinancing.
- Property Identification– Identification of the specific property
- Price and Terms– The sales price, if applicable, and other relevant terms of the transaction.
- Occupancy– The veteran’s intention to use the property as a home to be occupied by the veteran (or other applicable VA occupancy requirement).
Once one of those two requirements are filled, the attorney-in-fact is able to conduct the loan application process without any involvement from the veteran. However, at loan closing the lender has to verify that the veteran is alive, and if he or she is on active duty, verify that they are not currently MIA. This is to protect a veteran’s entitlement being used fraudulently without the veteran’s knowledge. We’ll elaborate on that requirement as well as outline the rest of the requirements for using an attorney-in-fact in the next article. As you can tell, most of these requirements are to reassure the lender and the VA that the person acting as your attorney-in-fact really has your permission to do so. These requirements protect you from having a stranger pose as your attorney-in-fact without your knowledge. Obviously, if you have selected someone you trust to be your attorney-in-fact, fulfilling these requirements is just a formality but they are there for your protection and the protection of the integrity of the VA loan program.
Check out the following article for the rest of the story on powers of attorney and feel free to give us a call at Low VA Rates if you have any questions.