Homeowners' Authorization Letter
Also known as: borrower authorization letter, third-party authorization, authorization to release information, borrower consent letter
A homeowners' authorization letter is a signed document in which a borrower grants a designated third party permission to communicate with the loan servicer or lender about the borrower's account. In mortgage note investing, this letter is essential when a family member, attorney, housing counselor, or the note investor themselves needs to discuss account details, negotiate a workout, or access loan information on behalf of the homeowner.
Why It Matters in Note Investing
When a note investor acquires a non-performing loan, the borrower is not always the person who initiates contact. In many cases, a spouse, adult child, sibling, or other representative reaches out first — especially when the borrower is elderly, incapacitated, or simply reluctant to engage directly. Before the servicer can share any account-level information with that person, a signed authorization letter must be on file.
Without this letter, federal privacy regulations — including the Gramm-Leach-Bliley Act (GLBA) and servicer-specific compliance policies — prohibit the servicer from disclosing balance information, payment history, or payoff statement details to anyone other than the borrower of record.
What the Letter Includes
A standard homeowners' authorization letter contains:
| Element | Purpose |
|---|---|
| Borrower's full legal name | Identifies the account holder |
| Property address | Ties the authorization to a specific loan |
| Loan number (if known) | Ensures the correct account is referenced |
| Authorized party's name and contact info | Identifies who may receive information |
| Scope of authorization | Defines what the third party may do (receive information, negotiate, make payments) |
| Borrower's signature and date | Establishes legal consent |
| Expiration or revocation terms | Specifies how long the authorization remains valid |
Most loan servicing companies have a standard authorization form they require borrowers to complete. When working with a servicer, it is best to use their template rather than a generic letter, as non-standard forms may be rejected or cause processing delays.
Authorization Letter vs. Power of Attorney
A homeowners' authorization letter is not the same as a power of attorney (POA). The authorization letter permits a third party to communicate about the account and receive information. A power of attorney grants legal authority to act on the borrower's behalf — including signing documents, agreeing to modifications, or executing a deed in lieu.
| Authorization Letter | Power of Attorney | |
|---|---|---|
| Scope | Information access and discussion | Legal authority to act and sign |
| Formality | Simple signed letter or servicer form | Notarized legal document |
| Use case | Family member calling the servicer | Attorney executing a loan modification |
| Revocation | Borrower can revoke at any time | Varies by state law and POA type |
In practice, an authorization letter is sufficient for most borrower outreach and negotiation scenarios. A power of attorney is only necessary when the third party needs to execute legal documents on the borrower's behalf.
How It Comes Up in Practice
A common scenario: a note investor purchases a non-performing second lien. The borrower is unresponsive, but the borrower's sister calls the servicer wanting to settle the debt and clear the title. Before any account details can be discussed, the sister needs the borrower to sign an authorization letter. Once that letter is on file with the servicer, the investor can negotiate a discounted payoff or other resolution directly with the authorized representative.
This document sometimes appears in the collateral file as a "borrower authorization to release information," indicating that a prior servicer or lender had already established a third-party contact. During a collateral file audit, noting the presence of an existing authorization can provide insight into the loan's history and prior workout attempts.
Best Practices
- Use the servicer's form. Each servicer has its own compliance requirements — always request and use their standard authorization template.
- Get it signed early. When a third party makes first contact, send the authorization form immediately so there is no delay in future conversations.
- Confirm scope. Ensure the authorization covers the activities you need — some forms only permit information access, not negotiation authority.
- Keep a copy in the file. Store the signed authorization with your loan documents for compliance and audit purposes.
Get personalized guidance for your note investing strategy from industry experts.