If I have power of attorney over a joint owned property can I borrow against the home?

Question

My sister and I are joint owners of my mother's house.  The house was deeded to us many years ago. After my mother moved into a senior apartment we rented out the house.  I am responsible for the property and handle all the expenses as well as the rental income.   Since my mother is on a fixed income  the rental income is used for her extra needs as well as upkeep of the house, taxes insurance, etc.  My sister nor I are profiting from this income. My sister lives in another state and gave me Power of Attorney over the house when we were considering selling the home a couple years ago.  I want to get a mortgage on the home in order to do some major improvements/renovations to the house.  Can I borrow using her Power of Attorney without her financials, credit standing, etc.  She recently retired and I don't want her to be responsible for any repayment of the loan. I want to do the loan in my name only since I am solely responsible for the house.

Samuel G McKerall · Answer

If you mortgage the house the lender is going to require that you provide mortgagee's title insurance.  You are not likely to be able to find a title insurer that will insure a mortgage which is signed by any owner under a power of attorney.  Years ago you could, but not now.  They found they had problems honoring powers of attorney.  So your sister will have to sign the mortgage. 
 
There are two core instruments created when you take out a mortgage loan.  One is the promissory note, or real estate mortgage note, which evidences the debt and states the terms of the loan and the manner in which it is to be repaid.  The other is the mortgage, which provides security or collateral for the repayment of the debt.  If you repay the debt, everything is fine and the mortgage is released.  If you don't, the lender forecloses the mortgage and takes the real estate, and if you don't redeem from the foreclosure within one year, its lost forever. 
 
You will probably be able to find a lender that will make the loan with only you signing the promissory note, but with both of you signing the mortgage.  This will mean that only you will be personally obligated to repay the loan, but both you and your sister's interest in the house will be lost through foreclosure if the loan is not repaid. 
 
So the final answer is that your sister could lose her interest in the house, but she could not be sued for any deficiency left if the value of the house at the time of foreclosure does not cover the entire debt.  You, however, could be sued for any deficiency. 
 
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Q: If I have power of attorney over a joint owned property can I borrow against the home?