One of the documents that a borrower may be required to sign at closing is a Correction Agreement – Limited Power of Attorney.
It’s the kind of document that can evoke suspicion in any borrower. What kind of ‘Power of Attorney’ is this actually, and what is the lender going to do with this ‘power’? And what kind of ‘correction’ will the lender be empowered to make?
What I try to do is put the borrower at ease by explaining what this agreement is used for. First of all, it is a ‘limited’power of attorney, which means that there are limits to what powers it grants the lender. The document will read something like this:
The undersigned purchaser(s) (Borrower(s)), for and in consideration of XYZ Mortgage Company, agree that if requested by Lender or its agents, successors, or assigns, I/we will fully cooperate and adjust all TYPOGRAPHICAL OR CLERICAL ERRORS discovered in any or all of the closing documents presented at time of closing.
The undersigned hereby appoints as my/our attorney-in-fact to act for me/us in my/our name to correct any such errors, place my/our initials on documents where changes are made, and/or sign my/our name(s) to any document or form, and to perform any and every act required or necessary to effectuate the adjustment or correction of such errors. In the event this procedure is utilized, the borrower(s) shall be notified and receive a corrected copy of the changed document from the Lender: This power of attorney shall take effect upon the date of this agreement.
The power of attorney created herein is a durable power of attorney and shall not be affected by my subsequent disability or incapacity.__________________________________
I am a notary signing agent. I am not an attorney, and may not give legal advice. But one thing that I assure the borrower is that, this is an agreement to correct ‘clerical errors’. Also, this is a ‘correction’ agreement — not a ‘modification’ agreement. This means that the lender will not use this agreement to change the interest rate, or any other terms of their loan. A fixed rate will remain a fixed rate. If there is no prepayment penalty, it will stay that way. Etc.
Yes, but how long will the lender have this power?
That’s a good question, and one that the borrower should ask their loan officer. But typically a power of attorney ends when the granter dies. That could be a long time. But this type of power of attorney usually terminates in one year.
This is basically what the Correction Agreement – Limited Power of Attorney is about. It is used primarily as a convenience to the borrower.
And a convenience to the borrower is also the primary purpose of the notary signing agent.