Given the wave of refinancing which has been underway for months, it's not surprising that not all loans close without a few complications here and there. With summer upon us and many people away for weeks at a time, what happens when your lender has ventured off on to exotic location at the very same time you've got closing scheduled?

Such events really happen -- I know, they're happening to me. But not to worry, lenders and closing agents have done this stuff before and what seems complex to borrowers is old-hat to them.

In our situation we're refinancing a number of small loans from various properties into a single larger mortgage. The result will be lower rates, reduced monthly costs, and fewer checks to write.

But, of course, there are complications. Several of our loans were obtained from private trust funds and, as it happens, one trustee will be away for several weeks aboard a boat somewhere at sea. In this case, having the lender at closing won't be possible.

I must confess that when I heard this news I was less than thrilled. While my lender joyously bathed in tropical waters and enjoyed blue skies, would my loan be delayed? And while I waited for his return, what would happen to interest rates?

What to do?

There are several strategies which are possible.

One idea is to prepare all paperwork in advance on the condition that it shall not be valid unless certain payments are made. In effect, the existing lender need not show up at closing and part of the settlement process is actually completed in advance. This is fast, easy, and acceptable to everyone.

Another approach is to have closing and then fax the paperwork to the existing lender. This scenario assumes the existing lender can be reached by fax, and also that both the closing agent and the new lender will accept faxed signatures.

Before going forward with this concept, all parties involved -- the existing lender, the new lender, the closing agent, and you -- must be comfortable with faxed signatures. No doubt everyone will check with attorneys to assure that signatures by fax can be valid and accepted. In our case, since the closing agent is an attorney with a large real estate practice, this is not a worry -- however, rules may vary by state.

A third approach is to have the existing lender obtain a power of attorney. The paperwork needs to be acceptable to the closing agent, the new lender, and local authorities. In essence, what happens is that the existing lender names someone to act in his or her place for a limited purpose, in this case accepting payment for the loan and then releasing the debt.

The power of attorney document must be in a form acceptable to all parties and consistent with state rules. In our area, the existing lender's signature must be notarized, otherwise the paperwork will not be accepted.

The lending process has changed in the past few years to the point where events which once took weeks to accomplish can now be done electronically or in just a few days. My sense is that we'll quickly have closing and all existing lenders will be paid in full -- regardless of whether they're at the closing table or 6,000 miles away at sea.

If you find yourself in a quirky situation with a loan pay-off, relax and call your loan officer and closing agent. Within minutes what seemed like a problem can be solved in a way which meets local standards and makes everyone happy.

For more articles by Peter G. Miller, please press here.

Published: May 30, 2001

Use of this article without permission is a violation of federal copyright laws.