As ElderLawAnswers has previously reported, reverse mortgage lenders who are presented with an agent seeking to take out a reverse mortgage on behalf of an incompetent principal are typically asking for a letter from the principal's doctor stating that the senior was competent at the time the power of attorney was executed.
In a recent article in an industry newsletter, reverse mortgage lenders explain the practice and an ElderLawAnswers member attorney decries it, characterizing it as "age discrimination."
The article, in Reverse Mortgage Daily, reports that due to liability concerns, "when a power of attorney comes into play, lenders are asking for backup documentation, which often includes two doctors' notes" stating that the individual was competent when the POA was signed.
"If there's going to be a power of attorney used, we have to collect that documentation at signing," says Ernie Castro, reverse mortgage sales manager at MetLife Bank. "We need a doctor's letter that says the borrower is competent. If we have that, fine. If there's an issue, we'd have to refer to the dates that the power of attorney is executed." If the POA was signed long ago, Castro says, the lender requires a note from an attending doctor that says the borrower was competent at the time of signing.
"A doctor's letter is the key factor," says John Mitchell, owner of Reverse Mortgage USA. "The critical issue is: was a person competent when they signed the power of attorney. Their competency today is irrelevant. That's why our practice was to just get one doctor to acknowledge that."
The article then turns to the comments of Virginia ElderLawAnswers member Evan Farr, who was the first to raise the alarm in the elder law community about the reverse mortgage industry practice in a 2010 blog post.
Farr says that the "doctor's note" requirement adds time and effort to the reverse mortgage process, especially in cases where the POA was signed years before the reverse mortgage application.
"It could be weeks, months. It could be impossible," says Farr. "Say the power of attorney is 10 years old. The doctor could have gone out of business or could have moved twice."
Farr says the lenders' implicit assumption is that "every power of attorney is fraudulent," and he views the additional documentation requirements as age discrimination because reverse mortgage borrowers are seniors who are more likely to have powers of attorney. Farr also wonders why lenders will not accept documentation from the law firm that assisted with the POA's execution instead of the more burdensome requirement of a note from a doctor. He observes that his office is required and certified to make an assessment of competence as part of the power of attorney process.
"They assume that anyone acting on behalf of a reverse mortgage borrower is acting on behalf of malice," Farr says, noting that he isn't recommending reverse mortgages as much as he used to.
To read the full Reverse Mortgage Daily article, click here.
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