Changed Wire, Unrecorded POA, Expired Payoff
A settlement agent is closing a $390,000 cash-out refinance. At 1:40 p.m. she receives an email from "the borrower's realtor" giving revised wire instructions for the $312,000 payoff to the existing lender; the account name differs from the payoff statement by one word ("Holdings" versus "Holding"). The borrower is abroad and has given a limited power of attorney to his brother, signed four days ago and not recorded. The title company's written closing instructions require the borrower's personal signature. The new lender's funds arrive at 2:45 p.m.; the wire cutoff is 3:00 p.m.; the payoff statement is dated 41 days ago and expired after 30 days, with a per diem of $58.10. The deed of trust has already been sent for recording.
1. Walk through the wire-instruction decision and identify every red flag.
Read the worked answer
Do not wire on the emailed instructions. No exceptions for time pressure.
Red flags present:
- A change of instructions by email at all - legitimate lenders rarely change payoff wiring by email, and never without a phone call.
- The sender is a realtor, not a party to the transaction and not the payoff creditor.
- The account name varies by one word from the payoff statement - the classic altered-beneficiary tell.
- Manufactured urgency: 20 minutes to cutoff.
- The instructions change the destination, not just the amount.
Procedure: call back on a number independently verified from the original payoff statement or the lender's website - never a number in the email, never a number the email supplies on request. Confirm the account name, number, ABA, amount, and reference. Document the call. If verification is impossible before cutoff, hold the funds, notify the new lender and the borrower in writing, and wire the next business day after verification.
Who bears the loss: generally the party who failed to use reasonable verification - here the settlement agent, whose E&O and possibly the closing protection letter may respond. Note that a CPL's coverage terms, including fraud and dishonesty provisions, must be read before assuming it applies to a third party's impersonation.
2. May the agent close on the brother's power of attorney? What must happen before it can be used?
Read the worked answer
Not as the file stands. Three separate problems:
- Authority. Read the instrument: a "limited" power of attorney may authorize a sale but not a new mortgage or a cash-out refinance, which is a new debt. If it does not expressly authorize borrowing and encumbering the property, the brother cannot sign the deed of trust.
- Formalities and recording. Many states require notarization and specific execution formalities, and lenders and title insurers typically require the POA to be recorded so it is in the chain. An unrecorded four-day-old POA has not been reviewed by underwriting.
- Closing instructions. The title company's written instructions require the borrower's personal signature. The escrow agent cannot unilaterally deviate; she needs amended written instructions from the lender and written approval from the title underwriter.
Path forward: obtain underwriter approval and lender consent in writing; record the POA; verify the brother's identity; confirm the borrower is alive, competent, and not under duress (a call or video verification to the borrower directly is prudent, though identity must be independently established). Or, cleaner: arrange a mobile notary abroad or a power of attorney executed in a form the lender and insurer will accept, and close when the paperwork is right. A cash-out refinance closed on a defective POA is a voidable loan and a title claim waiting to happen.
3. Handle the expired payoff, the 3:00 p.m. cutoff, and the fact that the deed of trust is already out for recording.
Read the worked answer
Expired payoff. A 41-day-old statement with a 30-day good-through date is stale: the principal may have changed, and the quoted per diem may no longer be accurate (many lenders assess interest only through a stated date and add fees). Obtain a fresh payoff quote for the intended disbursement date. If the wire must go today, compute the per diem from the statement's good-through date to the disbursement date ($58.10 times the days elapsed) and add a buffer for fees; overpaying slightly is recoverable, underpaying leaves the old loan of record.
Recording already sent. Recording before disbursement creates a gap: the new deed of trust is of record while the old loan remains unsatisfied. Manage it by (a) confirming the recording number and time, (b) wiring the verified payoff immediately, and (c) obtaining the existing lender's recorded release or satisfaction and issuing a date-down endorsement to the lender's policy once it records. If the payoff cannot be wired today, notify the new lender in writing - do not let a recorded deed of trust sit against an unsatisfied senior lien without disclosure.
The overall judgment call: the cutoff is a business inconvenience, not a legal justification. A missed cutoff costs a day of interest. A misdirected $312,000 wire, or a closing on an unauthorized POA, costs the agent its license and its E&O limits.