Sunday, September 12, 2010

Who can be an agent for a mortgagor in negotiations with a lender?

My firm recently was confronted from a loan servicer (mortgagee and / or agent) that we needed our authorizations to have specific names of individuals rather than the firm's name as the authorized agent. This requirement conflicts with what I have been suggesting to students at my classes at both the Real Estate School and while teaching MCLEs for First American. I always advise using the firm's or business' name (broad authorization) so you can easily have coverage in negotiating with a servicer if you are unavailable personally, but a colleague is available.

I hate giving out bad advice, so I looked into it further and learned the applicable definitions under the Power of Attorney Laws. I know that an authorization is not necessarily a Power of Attorney and that a servicer can require what they want, but if they do not like your authorization, simply using a Power of Attorney would also do the trick and servicers cannot reject a properly executed Power of Attorney under law.

To find the applicable rule, look under Title 15 of Article 5 of the General Obligations Law, Section 5-1508(4). This section provides that "any person, other than an estate or trust, may act as an agent, co-agent or successor agent under a power of attorney". A "Person" is defined in Section 5-1501 as being "an individual, whether acting for himself or herself, or as a fiduciary or as an official of any legal, governmental or commercial entity (including, but not limited to, any such entity identified in this subdivision), corporation, business trust, estate, venture, government, governmental subdivision, government agency, government entity, government instrumentality, public corporation, or any other legal or commercial entity."

Therefore, an entity can be designated as an agent under the Power of Attorney Law and I stand by my recommendation to use your business entity if you are performing Foreclosure Defense, Short Sales or Modifications and need to negotiate with the servicer on your client's behalf.