Part 4 – Signing Loan Documents when a Power of Attorney is Involved
Welcome to Part 4 of the Wills and Estates series in which we have been discussing notarizing estate planning documents.
Today, we will shift directions a bit and talk about handling a loan signing appointment where one party has been granted the authority to sign documents for another through the execution of a power of attorney (POA). This can happen when a borrower has suffered a stroke lets another person handle signing of documents. Another situation is when a spouse is out of town or a borrowing spouse is in the military. I have also handled loans with single borrowers who are on military duty and have left one of their parents in charge of their affairs by use of a power of attorney.
For the nuts and bolts on signing and notarizing of a power of attorney, refer to last week’s article Part 3 – Notarizing a Power of Attorney.
Document Package Types Signed with POAs
You may be curious about whether certain loan documents are more likely to be signed with a POA than others. It would be rare for commercial loan documents to be signed with a POA. But, signing with a POA is a possibility in almost any of the other types of notary signing agent loan or real estate packages you run into. (To see a list of those and what to expect from each, take a look at a previous article, 9 Typical Loan Signing Agent Packages.)
We discussed terms in Part 3, but I think it might be helpful to list them here, as well.
- Agent – The individual authorized to act on behalf of the principal.
- AIF – Acronym for Attorney-in-fact
- Attorney-in-fact – This means the same as “agent,” (the one authorized to act on behalf of the principal).
- Grantee – Another way to say “agent” or “attorney-in-fact.”
- Grantor – The person authorizing the other to act is the principal, grantor, or donor (of the power).
- Power of Attorney (also known as a “letter of attorney”) – A written authorization to represent or act on another’s behalf in private affairs, business, or some other legal matter. (Wikipedia)
- POA – Acronym for Power of Attorney. You will see POA used in the article.
- Principal – The person authorizing the other to act is the principal, grantor, or donor (of the power).
Procedures and Tips
The only downside to an assignment using a POA is time. It will take longer to sign several words rather than merely a first and last name. Otherwise, below are a few suggestions for new notaries who haven’t handled this type of assignment yet.
Ask if you are required to pick up and return the original POA.
In my experience, the original POA is usually in the hands of the title company before the signing takes place and I don’t see it or a copy of the POA. However, this is not always the case. Ask the hiring party if you need to pick it up while you with the signer.
Know exactly how the borrower must sign the documents.
Check for written instructions on signature requirements. One size does not fit all; you will need to check each time to find out the preferred way to sign. If there are no instructions, call your hiring party.
Make sure the signers know how to sign.
Once I know how the documents should be signed, I write that information on plain 8 ½” x 11” paper in large print and take it with me to the appointment. You’ll want to make sure you have the signers on the same page with you. It’s going to be a good bit of writing and mistakes will be made. Make sure you print the documents you are giving to the borrowers exactly as the documents you are having signed. The extra copy will be a great back up in case of errors.
Know how to complete the notarial certificate.
Before you have a signing that involves a person signing with power of attorney, look up the appropriate notarial certificates for your state so that you may prepare for handling this type of package.
The certificates in the package may have all the blanks filled in or you may have to complete all of them. It will be a plus to know how the certificate looks for your state so you can complete it quickly.
California notaries, of course, have certificates that recognize individuals only and do not change language to reflect representative capacity. Generally speaking, however, all other states will have certificates for use with an agent and/or attorney-in-fact who has power of attorney to sign on behalf of a principal.
Notarial Certificates (Expect more blanks.)
Certificates may have more blank spaces to complete than you are accustomed to. For instance you could run into this.
Acknowledged before me, ___________, _____________, on _________ by __________________as ________________ on behalf of _________________.
And, it would be much easier to complete the certificate if you knew that your state’s certificate would be completed this way for a power of attorney signing:
Acknowledged before me, Shelly Notary, Notary Public, on July 20, 2020 by Harry Stone as attorney-in-fact on behalf of Edgar A. Poe.
Below are two certificates I pulled randomly from Arizona and Arkansas statutory notarial forms so you could see an example.
State of Arizona
County of Yavapai
The foregoing instrument was acknowledged before me on July 4, 2020 by Harry Stone as attorney-in-fact on behalf of Edgar A. Poe.
Notary Public, State of Arizona
State of Arkansas
County of Pulaski
On this the 4th day of July, 2020 , before me, Shelly Notary, the undersigned officer, personally appeared Harry Stone, known to me (or satisfactorily proven) to be the person whose name is subscribed as attorney-in-fact for Edgar A. Stone and acknowledged that he executed the same as the act of his principal for the consideration, uses, and purposes therein contained.
IN TESTIMONY WHEREOF I hereunto set my hand and official seal.
Notary Public, State of Arkansas
If you cannot find this type of certificate among your state’s authorized certificate samples, contact the office of your notary public administrator. It isn’t uncommon to learn you will be working with a POA for the first time at the very last moment when the documents appear in your inbox. Being familiar with this type of certificate will be beneficial.
Common Signature Lines
As stated above, always know how the borrower / signer must execute the documents. Every case is different. However, below are a few examples of how documents are signed. The “ink” part of the signature block is in blue.
Harry Stone as Attorney-In-Fact
For Edgar A. Poe Pursuant to
POA Dated Xx Xx, Xxxx
EDGAR A. POE
Edgar A. Poe by Harry Stone, Attorney-In-Fact
EDGAR A. POE
Edgar A. Poe by Harry Stone, Attorney-in-Fact
EDGAR A. POE, by HARRY STONE as his Attorney-in-Fact
Harry Stone, Attorney-in-Fact for Edgar A. Poe
EDGAR A. POE by HARRY STONE as his Attorney-in-Fact (or POA)
Here are a few tips your hiring parties will appreciate.
- Stay out of the margins. Leave 1” clear around the document.
- Ensure the signer keeps the handwriting above the line so that the printed information under the line is not obscured by handwriting.
- If a mistake is made, use the signer’s copy and start over with a clean document. It’s not necessarily against the rules to strike and initial corrections, but neatness and minimal strike-outs are always preferred.
Safeguards in Place by Lender and Title Company
New notaries may feel obligated to look at the POA to make sure that the person signing has the proper authority to sign document. It’s not necessary unless required by law.
ID the Signer
The notary must ID the signer, but the lender and title company take care of vetting the POA.
Precautionary Steps Taken Before the Notary is Called
Perhaps it would be helpful to know that many precautionary steps are taken by the lender’s attorney and the title company before the loan is approved. Many steps are performed again right before the documents are signed. It goes without saying that the lender and title company want things to be done right.
The checklist below comes from my own layman’s research, discussions, and observations. It should never be shared with signers or discussed at the table–it is stated only to help new notaries see that someone else is taking care of ensuring that the POA is valid. One of the stakeholders will investigate. It may be done by the lender, lender’s attorney, or the title company and is far more detailed and probing than a notary could do by looking at a POA.
- Determine that the principal is still alive.
- Examine the POA to make sure that the POA is signed by the principal (aka grantor or borrower) and that the name under which it was signed and the name of the agent / attorney-in-fact are sufficient for the note’s signature line.
- Make sure the POA provides adequate power for the agent / attorney-in-fact to sign loan documents for the principal.
- Examine the notarial act for validity.
- Check the date on the POA. It must be dated prior to the execution of documents.
- If this relates to a home equity loan on a Texas homestead property, the POA must have been signed in a compliant location (such as a title company, lender’s office, or attorney’s office).
- Ensure that the principal has not become a ward or the subject of guardianship proceedings since the signing of the POA.
- Contact and speak directly to the principal by phone to ask about the POA and if the principal has divorced or married since the POA was signed.
- Contact and speak directly to the agent / attorney-in-fact to ensure he or she is alive, available, and willing to sign documents on behalf of the principal.
- Collect appropriate identity documentation for the appointed agent / attorney-in-fact named within the POA.
If the POA is not adequate, it must be rejected and replaced.
Look up your state’s attorney-in-fact certificates and familiarize yourself with the language.
If they aren’t easily found, contact your state’s commissioning authority.
If you haven’t already, sign up for a notary training course – boost your confidence level by learning notary basics.
In case you missed the previous articles in this series —
- Part 1 – Introduction to Wills and Estate Documents for Notaries (PLUS MARKETING TIPS for the fall!)
- Part 2 – Notarizing Wills
- Part 3 – Notarizing a Power of Attorney
Next week’s article is Part 5 – Trust signings that include representatives of a trust or an estate. This will be our final installment Wills and Estate Documents for notaries.
The information in this article comes from my own non-lawyer experience as a notary public and my personal research. Nothing in this article should be construed as legal advice or the view of the owners of Notary.net.