Home Equity Loans

Life just got a little more complicated for elder homeowners who wish to borrow against the equity in their homes.

That’s because in 2014 the Texas Supreme Court ruled that a Power of Attorney that is used in closing a home equity loan is actually part of the closing documents. The result is that the Power of Attorney must be signed in the office of the title company, the lender or in a law office to be used in the closing.

There’s more. At least one title company has issued a bulletin that it will not recognize any Power of Attorney that was signed before June 21, 2013 for either home equity loans or for reverse mortgages.

That means that elders who signed a Power of Attorney outside of a law office, or who signed a Power of Attorney before June 21, 2013, and who are now incapacitated will most likely not be able to obtain a reverse mortage or home equity loan UNLESS a guardianship is opened.

Consider the consequences. A spouse suffers from dementia, and the couple needs money to fund home health care or to make accomodations to their home. They had always planned to use their home equity if needed for their care. They had done all of their estate planning in 2009, including Powers of Attorney, in anticipation of just such an emergency.

But when they try to borrow the money, they are told that the lender won’t close the transaction without title insurance, and the title company won’t accept their Power of Attorney. The spouse suffering from dementia can’t sign closing documents or sign a new Power of Attorney because he or she doesn’t have the capacity (and the transaction has to be closed, because of State law, in the offices of the title company or lender).

The only alternative the couple has is to seek a guardianship for the incapacitated spouse.

Seniors – pull out your Power of Attorney. If it was signed before June 21, 2013, or if it was signed outside of a lawyer’s office, then you may need to consider executing a new one in a lawyer’s office.

Hammerle Finley Law Firm – Call Us. We Can Help.