You’ve probably heard the phrase “power of attorney”
before. Some of you may even have a power of attorney, to help take care
of a friend or loved one. A power of attorney can do many things, but
in the simplest form, it is the authorization to represent another concerning
private affairs, business matters, and some legal issues.
The person who has the power of attorney (or the authorization to act on
another’s behalf) is called the agent, whereas the one giving the
power of attorney is called the principal. This relationship is sometimes
referred to as an “attorney-in-fact”. To be clear, the agent
is not inherently a lawyer and is prohibited from taking certain actions
that only a lawyer can perform, but they may be referred to as an attorney-in-fact
regardless. In the context of mortgage servicing and foreclosures, we
often see a mortgage servicer who has a power of attorney to act on behalf
of a larger entity, such as the actual owner of a loan.
While one entity may own your loan, they may hire another entity to perform
certain tasks related to your loan. For example, Owner A, who purchased
the rights to your loan, may hire a mortgage servicing company called
Servicer B to service your loan. Servicer B may be the entity who sends
you a mortgage statement, who maintains a website for you to go online
and make a payment, or who may handle all the aspects related to a foreclosure
lawsuit in the event your loan goes into default. There is nothing particularly
wrong or illegal about this practice – in fact it is quite common
in the mortgage servicing industry, however it is another layer of separation
between the entity that actually owns your loan, the entity who is foreclosing
on you, and you, the homeowner.
In the context of real estate law, many powers of attorney grant a sort
of unlimited ability to the agent, who can perform just about any (legal)
task necessary to service a mortgage loan. However, not all powers of
attorney’s are the same, and often times the bank in a foreclosure
action will fail to show they have the authority to foreclose your loan,
by failing to prove the right power of attorney exists. In fact, some
Florida Appellate Courts have held that a power of attorney is a critical
piece of evidence that may even preclude a bank from foreclosing a home.
Figueroa v. Federal National Mortgage Association, 180 So.3d 1110 (Fla. 5th DCA 2015), the bank tried to foreclose a borrowers
home by relying upon a Note and allonge which contained an indorsement.
The indorsement on the Note was to SunTrust from SunTrust as power of
attorney for Global Mortgage Inc. What this means is that SunTrust, who
(presumably) had a power of attorney with Global Mortgage Inc., was authorized
to indorse the Note from Global Mortgage Inc. to SunTrust. This seems
a little self-serving though: a Note that is payable to Owner A is indorsed
from Servicer B to Servicer B. A cleaner way to handle this would be to
simply indorse the Note from Owner A to Servicer B (or based on
Figueroa, from Global Mortgage Inc. to SunTrust, instead of SunTrust as attorney
in fact for Global Mortgage Inc. to SunTrust).
Thankfully, the Court in
Figueroa found that since there was no power of attorney in evidence or otherwise
proven to the Court, there was no authority to support the idea that SunTrust
could indorse the Note to itself, on behalf of Global Mortgage Inc. The
case was eventually resolved in favor of the borrower, in part because
the power of attorney was not proven. Any easy way to identify if a bank
is relying on a power of attorney is to look at any documents you are
served with – if you see the phrase power of attorney or attorney
in fact, there is a good chance this issue will come up in your case,
and it could serve as an additional defense to any claims of foreclosure
the bank is making.
If you believe the bank is relying on a power of attorney, contact us to
set up and appointment to go over your options. For more information about
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