Problems You Never Want to See:

The "Soon-to-be-Ex" Power of Attorney

Presented by Hayden-Anne Breedlove, Counsel

Here's a scenario that raises multiple red flags in a refinance transaction. Property is currently vested in Husband and Wife as co-owners. The lender's instructions indicate that Wife is refinancing into her name only. Because Husband remains on title, a requirement was made that he must either:

• Join in the new deed of trust,
• Execute and record a deed conveying his interest to Wife

In response, the lender provided a Marital Settlement Agreement reflecting that the parties have separated and are pursuing divorce. Then came the complication: the lender submitted a Power of Attorney (POA) executed by Husband appointing Wife as his agent, with the intent that Wife would use the POA to convey Husband's interest to herself. The question becomes: Can Wife, as attorney-in-fact for Husband, deed Husband's interest to herself?

Under Va. Code § 64.2-1608(B), an agent's authority terminates when an action for divorce or legal separation is filed, unless the POA provides otherwise. In this case:

• The POA was executed before the separation date listed in the Marital Settlement Agreement.
• The parties are separated and pursuing divorce.
• It is unclear whether a formal divorce action has been filed.

Even if a technical argument could be made that the POA has not yet terminated, this is not simply a statutory question. It is an underwriting risk question.

Why This is a Problem

This is the type of fact pattern that makes underwriters uneasy for several reasons:

1. Self-Dealing Concern. Wife would be using a POA to transfer Husband's ownership interest to herself. That creates an inherent appearance of self-dealing.
2. Impending Divorce. When divorce is being actively pursued, reliance on a POA between spouses becomes risky. Authority can terminate upon filing for divorce.
3. Post-Closing Challenge Risk. If Husband later claims he did not intend the conveyance, the insurer may be left defending the validity of the deed.

An affidavit from Husband stating he is aware of a approves the conveyance does not eliminate the structural risk. If he is available to sign an affidavit, he is available to sign the deed.

The safer approach is:

• Husband should execute the deed directly, or
• Husband should appoint a neutral third party as attorney-in-fact to execute the conveyance.

This is a prime example of when electronic notarization can resolve logistical concerns without creating unnecessary title risk.