Georgia Rules Secured Creditor Must Be In Chain of Title Prior To Foreclosure Sale

Georgia Rules Secured Creditor Must Be In Chain of Title Prior To Foreclosure Sale

By Daniel Edstrom
DTC Systems, Inc.

Information from Nye Lavalle and (   Read the entire 14 page ruling for everything, or the following notable excerpts.

Excerpt 1

In a letter dated July 20, 2010, McCurdy & Candler, L.L.C., informed Plaintiff that the property was scheduled for public foreclosure sale on September 7, 2010, before the courthouse door in Fulton County, Georgia. (Id. at Ex. B.) The letter identified BAC Home Loans Servicing as the creditor and stated that the entity with the full authority to discuss, negotiate, or change all terms of the mortgage was Bank of America. (Id.) The foreclosure occurred, and Fannie Mae is now representing to Plaintiff that it owns his home pursuant to the foreclosure sale and demanding that he vacate the property. (Id. ¶ 8.)

In his amended complaint Plaintiff specifically asserts that Fannie Mae owned his loan at the time of the foreclosure and BAC was merely the servicer. (Id. at ¶ 11.) He attaches to the complaint letters from Bank of America and its counsel, dated June 28 and October 13, 2010, which state that Fannie Mae (or in the second letter “FNMA AA MST/SUB CW Bank REO”) is the owner of his mortgage loan and Bank of America/BAC is the servicer. (Id. at Exs. D and E.) These letters identifying Fannie Mae as the secured creditor considered alongside the foreclosure notice letter identifying BAC as the secured creditor created confusion about the identity of the holder of the loan. Plaintiff alleges that no assignment to Fannie Mae was recorded in the county deed records prior to the foreclosure sale. (Id. at 12.)

Excerpt 2

[..] This statutory section requires that the creditor advise the homeowner of the “individual or entity who shall have full authority to negotiate, amend, and modify all terms of the mortgage with the debtor.” O.C.G.A. § 44-14-162.2. The creditor must send the statutory notice by “registered or certified mail or statutory overnight delivery, return receipt requested.” Id. The statute expressly requires a higher level of notice for residential loans than nonresidential loans.

Excerpt 3

Georgia’s nonjudicial foreclosure statute authorizes the secured creditor to foreclose in conformity with O.C.G.A. §§ 44-14-162 et seq.2 “Secured creditor” is not defined in the statute and is therefore to be given its ordinary meaning. See O’Neal v. State, 288 Ga. 219, 220-21 (Ga. 2010) (“we apply the fundamental rules of statutory construction that require us to construe the statute according to its terms, to give words their plain and ordinary meaning, and to avoid a construction that makes some language mere surplusage”). Merriam-Webster’s Dictionary defines creditor as “one to whom a debt is owed; a person to whom money or goods are due.” Black’s Law Dictionary (9th ed.) defines creditor as “one to whom a debt is owed; one who gives credit for money or goods,” and secured creditor as “a creditor who has the right, on the debtor’s default, to proceed against collateral and apply it to the payment of the debt.” Thus, according to the plain language of the statute, the secured creditor – the entity to whom the debt is owed – is authorized to foreclose pursuant to Georgia’s nonjudicial foreclosure statute.

The sequence of legislative enactments, specifically the recent amendment of the statute in 2008, bolsters this understanding of the language of O.C.G.A. § 44-14-162 et seq. At that time, the Georgia General Assembly added the following clause to section 162: “The security instrument or assignment thereof vesting the secured creditor with title to the security instrument shall be filed prior to the time of sale in the office of the clerk of the superior court in the county in which the real property is located.” O.C.G.A. § 44-14-162(b). This addition to the statute clearly demonstrates the legislature’s intent to require the identity of the secured creditor to be of public record prior to the foreclosure sale. [..]

Excerpt 4

[..] All of these interrelated code sections show that the statute requires clear disclosure of the secured creditor and the entity with authority to modify the loan and does not permit obfuscation and subterfuge on these material points.

Under the facts alleged here, if presumed true, the actual “secured creditor” did not provide notice of the foreclosure sale as required by O.C.G.A. § 44-14-162.2. Nor did the servicer, acting as agent for the secured creditor, send a foreclosure notice that properly identified the secured creditor. Rather, the loan servicer sent a notice of foreclosure identifying itself as the secured creditor when it was not. (Am. Compl. Exs. B, D, E.)

Excerpt 5

Misidentifying the secured creditor creates confusion and doubt regarding the identification of the entity with authority to modify.

Excerpt 6

Sending a foreclosure notice that misidentifies the secured creditor violates the spirit and intent of O.C.G.A. § 44-14-162.2.

Excerpt 7

Defendants concede in their reply brief that Fannie Mae was the secured creditor, and simply argue that Bank of America could send the foreclosure notice as Fannie Mae’s agent. (Reply at 4-5.) While troubling for the reasons set forth above, this concession bolsters Plaintiff’s other basis for his wrongful foreclosure claim – that the assignment of the security deed to the secured creditor, Fannie Mae, was not filed prior to the time of sale. Defendants argued in their original brief that there was no need to record an assignment to Fannie Mae because the assignment to Bank of America was sufficient to comply with section 162(b).

Excerpt 8

Therefore, based on the allegations in the amended complaint, BAC evaded the most substantive requirements of Georgia’s foreclosure statute in that (1) it was not the secured creditor entitled to foreclose despite providing a notice letter affirmatively representing it was the creditor; and (2) it failed to file the assignment of the security deed to the secured creditor in the county deed records prior to the foreclosure. See O.C.G.A. § 162(b); Weems v. Coker, 70 Ga. 746, 749 (Ga. 1883); Cummings v. Anderson, 173 B.R. 959, 963 (Bankr. N.D. Ga. 1994).3 The Court accordingly DENIES the motion to dismiss Plaintiff’s claim for wrongful foreclosure based on failure to comply with Georgia foreclosure law.

Download ruling here:

Author: dmedstrom

Reverse Engineering and Failure Analysis
– Reverse Engineering Wall Street

Leave a Reply

Your email address will not be published. Required fields are marked *