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American College of Mortgage Attorneys — Partner with the Best®

Formed in 1974, the American College of Mortgage Attorneys (ACMA) is comprised of over 500 lawyers in North America who are experts in mortgage law.

United States

Georgia

The security instrument universally used is the deed to secure debt (sometimes called a security deed). A deed to secure debt conveys security title directly to the lender (without the use of a trustee) and contains a power of sale. A security deed is very similar to a mortgage in that it involves a conveyance of land to secure a debt. The key difference is the defeasance clause. If the instrument provides for cancellation or reconveyance upon payment of the debt, it is a security deed; if the instrument provides that the conveyance to the grantee shall become null and void upon payment, it will likely be construed as a mortgage. Although Georgia law recognizes mortgages, mortgages carry with them a variety of practical problems, including priority and enforcement, stemming from the fact that a mortgage is only a lien and not a conveyance of title. A lender holding a mortgage, rather than a security deed, must resort to judicial foreclosure, which can be costly and time-consuming. Therefore, it is important that the security instrument evidence a clear intention to create a deed to secure debt and not a mortgage. The best practice is to ensure that there is nothing in the security instrument that may be construed as a creating a mortgage, rather than a deed to secure debt, and to reference the statutory provisions regarding deeds to secure debt (O.C.G.A. &sect;&sect;&nbsp;44-14-60 et seq.).

SECURITY INSTRUMENT USED

To be entitled to be recorded, a security instrument must contain the following: <ul>
 <li>Three inch margin of blank space at the top of the first page of the security instrument for the clerk's recording information (C.G.A. &sect; 15-6-61(a)(10)).</li>
 <li>The first page of the security instrument must include the following:</li>
 <li>Name and mailing address of the natural person to whom the security instrument is to be returned after recording at the top of the first page of the security instrument (O.C.G.A. 44-2-14(b)). The name of the individual who prepared the security instrument does not have to appear on the document.</li>
</ul> &nbsp; <ul>
 <li>The date of the security instrument. (C.G.A. &sect; 44-14-63(b)(1))</li>
</ul> &nbsp; <ul>
 <li>The names of the grantor/borrower and grantee/lender. O.C.G.A. &sect; 44-14-63(b)(2))</li>
</ul> &nbsp; <ul>
 <li>The mailing address of the grantee/lender. (O.C.G.A. &sect; 44-14-63(b)(3))</li>
</ul> &nbsp; <ul>
 <li>The tax parcel identification number/map and parcel identification number, if applicable. (O.C.G.A. &sect; 44-14-63(b)(4))</li>
</ul> &nbsp; <ul>
 <li>The original loan amount, or in the event of a modification of the loan, the amount of any outstanding principal and any additional advance. (C.G.A. &sect; 44-14-63(b)(5))</li>
</ul> &nbsp; <ul>
 <li>The initial maturity date(s) for the obligations secured by the security instrument. (O.C.G.A. &sect; 44-14-63(b)(6)). If the security instrument secures a note or notes and the loan documents include one or more options to extend the initial maturity date, the “outside” maturity date(s) of the note(s) must also be set forth on the first page of the security instrument. (C.G.A. &sect; 48-6-66)&nbsp; The “outside” maturity date is the initial stated maturity date, as it would be extended by any and all extension options set forth in the loan documents, regardless of whether the extension options have been, or will be, exercised. [Example:&nbsp; The initial stated maturity date of the loan secured by this security instrument is [_____________], as such maturity date may be extended to a final maturity date of [______________] in accordance with the terms of the loan documents.]</li>
</ul> &nbsp; <ul>
 <li>The amount, if any, of intangible recording tax which is payable upon the recording of the security instrument. (O.C.G.A. &sect; 44-14-63(b)(7))&nbsp; In the event of an additional advance pursuant to a modification of an existing loan, or other additional advance not included in the original loan amount which is secured by the recorded security instrument, the document to be recorded must set forth the amount of intangible recording tax which is payable in connection with the additional advance. (O.C.G.A. &sect; 44-14-63(b)(8))&nbsp; In the event the security instrument is exempt from the payment of intangible recording tax, the security instrument must reference a citation to the authority providing for such exemption. (O.C.G.A. &sect; 44-14-63(b)(9))</li>
</ul> &nbsp; <ul>
 <li>The security instrument must be attested (e. witnessing the actual execution, not merely having the signer acknowledge the signature to be his or hers) by an “officer,” such as a notary public (O.C.G.A. &sect; 44-2-15) and by one or more other witnesses. (O.C.G.A. &sect; 44-14-61) A security instrument is attested when an officer and one or more natural persons see the maker sign the security instrument and they “attest” to the fact by signing the security instrument as such officer and witness. The “officer” is typically a notary public, but may be a judge of a court of record, or in the county of their office, a magistrate or the clerk or deputy clerk of the superior court or a city court of record. Id. &sect; 44-2-15. If the security instrument is executed out of state, the public official may be a notary, judge of a court of record, clerk of a court of record, justice of the peace, or a U.S. consul or vice consul. Id. &sect; 44-2-21. The “officer” (notary) must affix his or her seal to the instrument. e.g., id. &sect; 45-17-6. The attestation should appear opposite the grantor's signature on the security instrument, and be substantially in the form of the following:</li>
</ul> <table width="576">
 <tbody>
 <tr>
 <td width="262">
 Signed, sealed&nbsp;and delivered in the presence of:&nbsp;
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 Unofficial Witness
 Print Name:&nbsp;
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 Notary Public&nbsp;
 Print Name:&nbsp;
 &nbsp;
 My Commission Expires:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;
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 [NOTARIAL SEAL]&nbsp;
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 </td>
 <td width="314">
 BORROWER:&nbsp;
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 [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ]&nbsp;
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 By:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
 Name:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 
 Title:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;
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 </tbody>
</table> A notary public may wish (or be required under its local statute) to use a separate (often statutorily specified form of) acknowledgement. A separate acknowledgement attached to a security instrument will not render the security instrument unrecordable, so long as the notary&nbsp;also&nbsp;executes the attestation (above), and&nbsp;affixes&nbsp;his&nbsp;or her notary seal to the attestation.&nbsp; A security instrument which is only acknowledged, is not entitled to be recorded. &nbsp; A security deed must be recorded within 90 days after it is executed, and the intangible recording tax, if any, paid as a condition to recording. O.C.G.A. &sect; 48-6-61. Where a security deed is assigned, the assignment instrument must be recorded in the public records prior to the time of a foreclosure pursuant to the power of sale is exercised. O.C.G.A. &sect; 44-14-162(b).&nbsp; Georgia adopted the Uniform Real Property Electronic Recording Act (O.C.G.A. &sect;&sect; 44-2-35) in 2009, which recognizes the validity and enforceability of real estate documents which are electronically recorded.&nbsp; As of July 1, 2023, the clerks of the superior court of all 159 counties in Georgia are required to accept electronically filed security instruments.&nbsp; O.C.G.A. &sect; 44-2-2(c)

RECORDING REQUIREMENTS

Although not a statute, a security deed will typically include a waiver of any constitutional right to a judicial hearing prior to foreclosure. This waiver is included to ward off due process challenges to Georgia's nonjudicial power-of-sale foreclosure system, which have been numerous, but unsuccessful.

STATUTES TO BE WAIVED

If the note or other evidence of indebtedness provides for the payment of “reasonable attorney's fees” without specifying “actual attorney's fees” or a specific amount or percentage, such provision is construed to mean 15 percent of the first $500.00 of principal and interest owing on the note and 10 percent of the amount of principal and interest owing thereon in excess of $500.00. O.C.G.A. &sect; 13-1-11. As a result, counsel for the borrower will often insist on revising the language to provide that the term “attorneys' fees” or “reasonable attorneys' fees” as used in the note and the security instrument means attorneys' fees actually incurred by a lender, and not statutory attorneys' fees under O.C.G.A. &sect; 13-1-11. Landlords of residential properties must deposit all security deposits in an escrow account. O.C.G.A. &sect;&nbsp;44-7-31. This requirement does not apply to deeds to secure debt, but if a lender becomes the landlord following a foreclosure or deed in lieu of foreclosure, then the lender is bound by this requirement.

UNUSUAL TREATMENT OF STANDARD PROVISIONS

Dragnet clauses or provisions purporting to encumber the property for future advances are limited to debts arising ex contractu between the original parties to the deed to secure debt, and are subject to subsequent limitations in some circumstances.&nbsp; (O.C.G.A. &sect; 44-14-1)

SECURING FUTURE ADVANCES

Whether or not a deed to secure debt contains clauses so providing, the document will secure advances made (i)&nbsp;to pay taxes, (ii)&nbsp;to pay premiums for insurance on the property, (iii)&nbsp;to pay sums due to the holder of the deed to secure debt on the property without which payment the secured position of the holder of the deed to secure debt advancing such payment would be jeopardized, (iv)&nbsp;to repair, maintain, or preserve the property, and (v)&nbsp;to complete improvements on the property, and will also secure expenses of collection and foreclosure, whether such advances were made by the original holder of the deed to secure debt and whether the property is still owned by the original grantor or is owned by a subsequent purchaser. O.C.G.A. &sect;&nbsp;44-14-2.

SECURING ADDITIONAL ADVANCES TO PROTECT THE COLLATERAL, INCLUDING PAYMENT OF TAXES AND INSURANCE

TRUSTEE UNDER DEED OF TRUST N/A.

Foreclosure customarily is by exercise of a nonjudicial foreclosure sale pursuant to the power of sale provided for in the deed to secure debt. See O.C.G.A. &sect;&nbsp;44-14-162. However, judicial foreclosure may be used by petition to the superior court of the county in which the property is located. See id. &sect;&nbsp;44-14-180. The judicial sale, once ordered by the superior court, will be made by the sheriff. Id. &sect;&nbsp;44-14-187. The holder of a mortgage or deed to secure debt may also foreclose in equity by filing a petition with the superior court. Id. &sect;&nbsp;44-14-49. Nonjudicial Foreclosure Sales: A power of sale must be contained in the security deed. See O.C.G.A. &sect;&nbsp;23-2-114. The holder of the security deed, whether the original holder or a transferee, may exercise the power of sale, which is not revocable by the death of the grantor. Id. Sales under the power of sale provision must be preceded by advertisement once a week for 4 weeks immediately preceding the day the sale will take place, in the “designated” legal organ [newspaper] of the county (or counties) in which the real property is located, or if there is no newspaper so designated, then in the nearest newspaper having the largest general circulation in the county. Id. &sect;&sect;&nbsp;44-14-162, 9-13-140 & 9-13-141. If such advertisement contains the address of the property to be sold, such information shall be set out in bold type. Id. &sect;&nbsp;44-14-162. Notice of the proposed sale must be given to the borrower by the lender no later than 30 days before the date of the proposed foreclosure. Such notice must be in writing, and (1) include the name, address, and telephone number of the individual or entity who shall have full authority to negotiate, amend, and modify all terms of the security deed with the debtor, (2) include a copy of the notice of sale to be submitted to the publisher, and (3) be sent by registered or certified mail or statutory overnight delivery, return receipt requested, to the property address or to such other address as the debtor may designate by written notice to the secured creditor. Id. &sect;&sect;&nbsp;44-14-162.1, 44-14-162.2. The notice provisions cannot be waived at the time the loan is made. Id. &sect;&nbsp;44-14-162.3. Any assignment of the deed to secure debt must be filed of record prior to exercise of the non-judicial power of sale. O.C.G.A. &sect;&nbsp;44-14-162(b). The sale must be made by public outcry at the courthouse on the first Tuesday of the month between the hours of 10:00 a.m. and 4:00 p.m. local time. Id. &sect;&nbsp;9-13-160. If the first Tuesday falls on New Year's Day or Independence Day, the sale must be held on the immediately following Wednesday. Id. &sect;&nbsp;9-13-161. The debtor's grant of the nonjudicial power of sale may be constitutionally suspect unless voluntarily, intelligently, and knowingly made, see Ruff v. Lee, 230 Ga. 426, 197 S.E.2d 376 (1973) (Gunter, J., concurring specially), though numerous due process challenges to the nonjudicial power of sale foreclosure system have on the whole failed. Deeds under power of sale resulting from foreclosures must be recorded within 90 days of the sale date. O.C.G.A. &sect;&nbsp;44-14-160. If the holder of the deed to secure debt wants to collect attorneys' fees as provided in the note, the holder must give the debtor 10 days' notice, after maturity of the note, that the holder will enforce the attorneys' fees provision. Id. &sect;&nbsp;13-1-11. If the debtor pays off the note during the 10-day period, the debtor is not liable for attorney's fees. See id. Length of Foreclosure Process: Nonjudicial foreclosure sales require publication of the sale for four weeks prior immediately to the day of foreclosure (first Tuesday of each month), so under certain circumstances, a nonjudicial foreclosure can be accomplished in as little as 31 days. Judicial foreclosure will require the typical length of time for a lawsuit, based on court caseload, etc. If no defense is filed, the suit could be as short as 30 days; if a defense is filed, the suit could extend for 1 or 2 years, or perhaps longer. Foreclosure Bid Requirements: None, except as may be set forth in the advertisement of sale,&nbsp;provided a purchaser at a foreclosure sale may tender cash or a cashier's or certified check issued by a financial institution insured by the Federal Deposit Insurance Corporation or the Federal&nbsp;Savings and Loan Insurance Corporation.&nbsp;See&nbsp;O.C.G.A. &sect; 9-13-166. There is no requirement that the sale be for fair market value,&nbsp;e.g., Kennedy v. Gwinnett Comm. Bank, 155 Ga. App. 327, 270 S.E.2d 867 (Ct. App. 1980) (en&nbsp;banc); however, a bid of fair market&nbsp;value is required as one of the conditions to the lender obtaining confirmation of the foreclosure for purposes of a deficiency judgment. The security instrument should specifically provide that the lender/grantee may bid at the foreclosure sale.&nbsp; Unless the security instrument so provides, a mortgagee cannot bid at its foreclosure sale.&nbsp;Palmer v. Young, 96 Ga. 246, 22, 40 S.E. 928 (1895).&nbsp; Foreclosed Property Registries: O.C.G.A. &sect;&nbsp;44-14-14 provides that a county or municipal corporation in Georgia may establish by ordinance or resolution a mandatory registry of vacant or foreclosed real property. Currently, approximately 50 cities and counties have established registries for vacant and foreclosed properties. To the extent a municipal corporation has established a mandatory registry, the penalty for failure to register, or failure to update the required information, cannot exceed $1,000.

BRIEF DESCRIPTION OF PROCEDURE

There is generally no redemption period following a foreclosure sale in Georgia. The United States federal government does have a right of redemption under the 1966 Federal Tax Lien Act. 26 U.S.C. &sect;&nbsp;7425.

REDEMPTION PERIOD AND PRICE

WAIVER OF REDEMPTION; REDUCTION OF REDEMPTION PERIOD

Prior to a nonjudicial foreclosure, a lender can sue the borrower and/or guarantor on the promissory note and/or guaranty and obtain a judgment for the full amount of the debt. There is no requirement that a lender foreclose on the collateral prior to seeking a judgment. However, once a foreclosure sale has taken place, if property is sold under nonjudicial power of sale and the sale price is less than the amount of the secured debt, a deficiency judgment against the borrower or any guarantor for the difference between the foreclosure price and the outstanding debt amount can be obtained only if there is a successful confirmation of the foreclosure sale. Confirmation is not necessary for (i) a deficiency resulting from a judicial foreclosure, (ii)&nbsp;a deficiency action against a guarantor, if the guarantor has validly waived the protections of O.C.G.A. &sect; 44-16-161, or (iii)&nbsp;if a judgment is entered against the borrower and guarantor before the commencement of a nonjudicial foreclosure.&nbsp;See&nbsp;O.C.G.A. &sect; 44-16-161(a);&nbsp;Ga. R.R. Bank & Trust Co. v. Griffith, 176 Ga. App. 198, 335 S.E.2d 417 (1985). Under the confirmation process, which is not a “civil action” in the superior court, but is a special statutory proceeding, the lender must first&nbsp;file a&nbsp;report of the sale with a sitting superior court judge within 30 days after the sale. O.C.G.A. &sect; 44-14-161(a). The report of sale must literally be personally filed with a sitting&nbsp;judge; merely filing the report of sale with the clerk of court, as though it were a regular lawsuit, is insufficient.&nbsp;Bentley v. N. Ga. Prod. Credit&nbsp;Ass'n, 170 Ga. App. 361, 317 S.E.2d 339 (Ct. App. 1984). However, the judge does have discretion to run&nbsp;his or her own chambers, and if the judge has given specific directions for where and how confirmation petitions should be delivered to chambers, the appellate courts will respect those procedures.&nbsp;See Flat Shoals Land Holding, LLC v. Decatur First Bank, 307 Ga. App. 536, 705 S.E.2d 311 (Ct. App. 2011). Second, the lender must name and give the borrower and all guarantors at least five (5) days' prior written notice of the confirmation hearing. O.C.G.A. &sect; 44-14-161(c). Finally, at the confirmation hearing, the lender must prove it complied with all statutory requirements as to “notice, advertisement, and regularity of the sale,” including establishing that the lender sold the property at the foreclosure sale for its “true market value.” O.C.G.A. &sect; 44-14-161. At the conclusion of the confirmation hearing, the judge may deny confirmation of the sale, confirm the sale, or under certain circumstances, order a resale of the property. The burden of proof is on the foreclosing party. It is not required that the property be appraised, but because the foreclosing party must have evidence to show the true market value of the property, O.C.G.A. &sect; 44-14-161(b), an appraisal as of the date of foreclosure is recommended. “True market value” is the same as “fair market value,” and requires the court to suppose usual market conditions without discounting for the property's distressed nature. See Cartersville Developers, LLC v. Georgia Bank & Trust, 292 Ga. App. 375, 664 S.E.2d 783 (Ct. App. 2008). If the judge denies confirmation of the sale, the lender may not seek any deficiency against the borrower or any guarantor. If the foreclosure sale is confirmed, the holder of the deed to secure debt may then file an action in the superior court seeking a deficiency judgment against the borrower and/or guarantor.

DEFICIENCIES

In general, a lease which is senior to the deed to secure debt (and which does not contain an automatic subordination clause) is unaffected by&nbsp;foreclosure, and a lease that is junior to the deed to secure debt (or which contains an automatic subordination clause) is terminated by the foreclosure sale, and the lessee has no right to continue in possession. While an “automatic subordination” provision in a lease is enforceable, it is unclear under current case law if the “non-disturbance” and/or “attornment” provision, to the extent also contained in the lease, will be respected. While a separate SNDA between a lender and the tenant will be enforced, it is also unclear whether a foreclosing lender can “pick and choose” which leases may survive the foreclosure, by artfully conducting a foreclosure “subject to” certain subordinate leases. As a result of this uncertainty, a prudent lender will require tenants of “important” leases to execute a subordination, non-disturbance, and attornment agreement with the lender.&nbsp;

EFFECT OF FORECLOSURE UPON LEASES

There are both civil and criminal usury laws in Georgia. Civil Usury:&nbsp; The law caps the maximum interest rate at 16% per annum where the principal is $3,000 or less. O.C.G.A. &sect;&nbsp;7-4-2. If the principal is between $3,000 and $250,000, there is no limit to the interest rate (except for criminal usury as discussed below), but the interest rate must be expressed in simple interest terms in writing. Id. For loans with principal in excess of $250,000, there is no interest rate limit under civil law, nor is there any requirement that the interest rate be expressed in simple terms. See id.&nbsp; Criminal Usury:&nbsp; The law provides that charging interest at a rate greater than 5% per month constitutes a misdemeanor. Id. &sect;&nbsp;7-4-18. Interest on unpaid interest is generally prohibited unless the loan is a first-priority security title to real estate and the contract provides for such capitalization. Id. &sect;&nbsp;7-4-17.

USURY CEILING

USURY EXEMPTIONS

Personal Property Filing: A UCC Financing Statement&nbsp;and any amendments to such financing statement should be filed in the filing office of the state where the debtor is located (if debtor is a registered organization, filing is completed in the state of organization). If the debtor is located in Georgia, the filing office for a UCC financing statement to perfect the security interest in personal property is the clerk of superior court of any county in the State of Georgia, and such filing will be indexed in the Georgia statewide central indexing system administered by the Georgia Superior Court Clerks Cooperative Authority. See&nbsp;O.C.G.A. &sect;&nbsp;11-9-501(a)(2) and&sect; 11-9-519(b). There is no central filing office for UCC financing statements in Georgia. The exceptions to the filing location rule are set forth in O.C.G.A. &sect; 11-9-501(a), and include (i) as-extracted collateral (e.g., minerals), (ii)&nbsp;agricultural liens, (iii)&nbsp;standing timber, and (iv) fixtures.&nbsp; Beginning August 1, 2023, only UCC forms with a revision date of July 1, 2023 will be accepted for filing.&nbsp; Current UCC forms are available on the Georgia Superior Court Clerks' Authority's website at www.gsccca.org/file/ucc-forms. Fixture Filing: A UCC Financing Statement, or record of a mortgage or security deed, filed as a fixture&nbsp;filing, is filed in the county, or each of the counties, in which the real property in Georgia is located.&nbsp;Id.&nbsp;&sect; 11-9-501(a)(1). Note that a record of a mortgage or security deed was not effective as a financing statement filed as a fixture filing from the period January 1, 1995 to June 30, 2013. O.C.G.A. &sect;&nbsp;11-9-502.&nbsp;Beginning August 1, 2023, only UCC forms with a revision date of July 1, 2023 will be accepted for filing.&nbsp; Current UCC forms are available on the Georgia Superior Court Clerks' Authority's website at www.gsccca.org/file/ucc-forms.

LOCATIONS FOR FILING

A deed to secure debt is effective in Georgia as a Financing Statement filed as a fixture filing if it contains the information required to be contained in a fixture filing in Georgia and is duly recorded. O.C.G.A. &sect;&nbsp;11-9-502(c). The recorded&nbsp;security deed which is effective as a fixture filing remains effective as a fixture filing until the security deed is released or satisfied of record, or its&nbsp;effectiveness otherwise terminates as to the real property, which eliminates the requirement to file continuation statements every five (5) years O.C.G.A. &sect; 11-9-515(e). A record of a mortgage or security deed filed between January 1, 1995 and June 30, 2013 was not effective as a financing statement filed as a fixture filing. O.C.G.A. &sect; 11-9-502.

SECURITY INSTRUMENT USED AS FIXTURE FILING

The defense of usury is personal to the debtor and is not available to a guarantor. O.C.G.A. &sect;&nbsp;7-4-11.

UNUSUAL PROVISIONS OR REQUIREMENTS

O.C.G.A &sect; 10-7-24 provides that a guarantor may give notice to the creditor after the debt becomes due demanding that the creditor proceed against the principal obligor, and if the creditor fails to commence an action against the principal obligor within 3 months after such notice (the principal obligor being within Georgia jurisdiction), then the guarantor shall be discharged. Typically, the creditor will obtain a waiver in the guaranty of this statute. As noted above, if property is sold under&nbsp;nonjudicial power of sale, a deficiency judgment against any guarantor can be obtained only if there is a successful confirmation of the foreclosure sale. Recent case law, however, has confirmed that a guarantor can waive O.C.G.A. &sect; 44-16-161 and any defense based on the lender's failure to confirm the foreclosure sale, effectively allowing the lender to side-step the confirmation process and pursue recovery against a guarantor without a confirmation of the nonjudicial foreclosure sale.&nbsp;See PNC Bank, Nat.&nbsp;Ass'n&nbsp;v. Smith, 298 Ga. 818, 785 S.E.2d 505 (2016). The courts have even allowed lenders a second “bite of the apple,” permitting a lender to pursue a deficiency judgment against a guarantor that had waived the protections of O.C.G.A. &sect; 44-16-161, even&nbsp;after the lender had sought, and was denied, judicial confirmation of its foreclosure sale.&nbsp;See York et al v. RES-GA LJY, LLC, 300 Ga. 869, 799 S.E.2d 235 (2017).

None, though to the extent that a creditor wishes to hold a guarantor liable for attorneys' fees, it must provide the guarantor the same statutory notice as the primary obligor. See O.C.G.A. &sect;&nbsp;13-1-11; Broun v. Bank of Early, 243 Ga. 319, 253 S.E.2d 755 (1979).

SPECIAL PROBLEMS IN ENFORCEMENT OF GUARANTY

See “DEFICIENCIES” above.&nbsp;Prior to a nonjudicial foreclosure, a creditor can sue the borrower and guarantors on the promissory note and obtain a judgment for the full amount of the debt. There is no obligation to foreclose&nbsp;before seeking a judgment. However, once a foreclosure sale has taken place, the lender cannot sue the borrower or guarantors on the deficiency debt without a confirmation of the foreclosure sale (or a valid waiver by the guarantor of the protections of&nbsp;O.C.G.A. &sect; 44-16-161).&nbsp;See, e.g., First&nbsp;Nat'l&nbsp;Bank & Trust Co. v. Kunes,&nbsp;230 Ga. 888, 199 S.E.2d 776 (1973);&nbsp;Taylor v. Thompson,&nbsp;158 Ga. App. 761, 282 S.E.2d 157 (Ct. App. 1981).&nbsp;

ISSUES AND GUIDELINES RELATED TO SEEKING / OBTAINING DEFICIENCY JUDGMENTS

The statute of limitations on a mortgage or deed to secure debt under seal is 20 years after the right of action has accrued thereon. O.C.G.A. &sect;&nbsp;9-3-23. The limitations period for a mortgage or a security deed not under seal is 6 years after the right has accrued. Id. &sect;&nbsp;9-3-24. Deeds to secure debt (which, unlike mortgages, pass title to the creditor) are also subject to another Georgia statute providing that title to real property conveyed to secure a debt shall revert to the grantor at the expiration of 7 years from the maturity of the debt or maturity of the last installment thereof. Id. &sect;&nbsp;44-14-80(a). However, where the record of the conveyance contains an affirmative statement that the parties intend to establish a perpetual or indefinite security interest in the property, the title reverts at the later of the expiration of (i)&nbsp;7 years from the maturity of the debt, or (ii)&nbsp;20 years from the date of conveyance. Id.

STATUTE OF LIMITATION PERIOD

Within sixty (60) days after payment in full of the indebtedness secured by a security instrument, the grantee or holder of the instrument is required to furnish to the clerk of the superior court of the county or counties in which the instrument is recorded, a legally sufficient satisfaction or cancellation to authorize and direct the clerk or clerks to cancel the instrument of record. O.C.G.A. &sect; 44-14-3 (b)(1). If the grantee or holder of the instrument fails to release the instrument within 60 days, it can be liable to the grantor for the sum of $500.00 as liquidated damages, and&nbsp;any losses&nbsp;incurred by the grantor, plus reasonable attorney's fees, if the grantor makes a written demand for liquidated damages to the grantee or holder of the instrument before the actual recording of the satisfaction, but not less than 61 days after the instrument is paid in full. O.C.G.A. &sect; 44-14-3 (c)(1). Total release or cancellation can be by deed (almost universally a quitclaim deed), or the holder may execute a writing (on the document or on a separate instrument), directing the clerk of court to mark the mortgage or deed to secure debt satisfied and cancelled. O.C.G.A. &sect;&nbsp;44-14-67. A special statutory prescribed form of cancellation for “lost, stolen or mislaid” deeds to secure debt is set forth in O.C.G.A. &sect;&nbsp;44-14-67(c).

REQUIREMENTS FOR RELEASE OF LIEN

HOMESTEAD ISSUES

COMMUNITY PROPERTY

An intangible recording tax is payable on notes secured by real estate if the maturity date of any part of the principal of the loan (including optional extensions) is more than 3 years from the date of the note. O.C.G.A. &sect; 48-6-60 to&nbsp;61. The intangible recording tax is $1.50 per $500 principal (or fraction thereof) of the note, subject to a $25,000 maximum on any one note.&nbsp;Id. The intangible recording tax is paid to the clerk(s) of the superior court(s) in each county in which the security deed is recorded as a condition to recording. The Georgia Department of Revenue has issued regulations which provide that the maximum amount of intangible recording tax payable on any single security instrument is $25,000, regardless of the number of notes secured by the instrument. Ga. Dept. of Rev. Reg. Rule 560-11-8-.02. Where the property is located in more than one county in the state of Georgia (and the security instrument is recorded in more than one county), the holder of the security instrument is required to provide an affidavit at the time of the recording of the security instruments, allocating the amount of intangible recording tax to be paid to each county. O.C.G.A. &sect;&nbsp;48-6-69(a).&nbsp;See,&nbsp;Ga. Dept. of Rev. Reg. Rule 560-11-8-.08. Where a long-term note is secured by property located both within the state of Georgia, and outside of the state of Georgia, the amount of intangible recording tax can often be reduced under the apportionment provisions set forth in O.C.G.A. &sect;&nbsp;48-6-69(b). See,&nbsp;Ga. Dept. of Rev. Reg. Rule 560-11-8-.07.&nbsp; The Georgia Department of Revenue has issued regulations setting forth certain security instruments which are not subject to intangible recording tax. See,&nbsp;Ga. Dept. of Rev. Reg. Rule 560-11-8-.14. Failure to pay the intangible recording tax is an&nbsp;absolute bar to the exercise of any remedy by the holder, but does not invalidate the security instrument, or affect the priority of the security instrument. The bar to the exercise of remedies can be removed at any time by the payment of the unpaid tax,&nbsp;plus a penalty in the amount of 50% of the unpaid tax, together with&nbsp;interest at the rate&nbsp;of 1% per month from the time the tax was due. The full logistical issues governing intangible recording tax and the interplay of the Department of Revenue regulations and the applicable statutory provisions can be complex, and are beyond the scope of this brief summary.

MORTGAGE TAX

DOCUMENTARY STAMP TAX

On Foreclosure Sale: No. O.C.G.A. &sect;&nbsp;48-6-2(7.1). On Deed in Lieu of Foreclosure: Yes, $1 per first $1,000 value of the property or fraction thereof, and 10&cent; for each additional $100 or fraction thereof. O.C.G.A. &sect;&nbsp;48-6-1. Values are computed by deducting the amount of any prior deeds to secure debt to which the property remains subject after the conveyance. Id. There is an exception for a deed in lieu of foreclosure if the deed is for a purchase money deed to secure debt that has been recorded for at least 12 months prior to the recording of the deed in lieu of foreclosure. See id. &sect;&nbsp;48-6-2(a)(7).

TRANSFER TAX

Yes, unless a court were to determine that (i) the choice of law state has no substantial relationship to the parties or the transaction or (ii) the result obtained from applying the law of the choice of law state would be contrary to Georgia public policy.

ENFORCEABILITY OF AGREEMENTS AS TO CHOICE OF LAW

A receiver may be appointed at the discretion of a superior court judge. O.C.G.A. &sect;&nbsp;9-8-3. Equitable principles apply; however, courts typically give some weight to the existence of a provision in the deed to secure debt authorizing the appointment of a receiver in the event of a default. A receiver is not appointed as a matter of right, and the need for a receiver must be clear. See, e.g., id. &sect;&nbsp;9-8-4. Grounds for obtaining a receiver include that the property requires protection, or there is “manifest danger of loss, destruction or material injury to those interested”. See, e.g., id. &sect;&nbsp;9-8-3. Insolvency of the party alone is insufficient. See, e.g., Ins. Ctr., Inc. v. Hamilton, 218 Ga. 597, 129 S.E.2d 801 (1963).

RECEIVERSHIP

None, but such fees may be treated as interest in deciding whether a loan is usurious. See O.C.G.A. &sect;&nbsp;7-4-18. All mortgage lenders on 1-4-family residential properties (but not commercial properties) must disclose to the applicant a list of all fees (e.g., appraisal fee, credit report fee) payable by the applicant, any fees to be paid in connection with the loan commitment and the loan, and the conditions under which any or all of such fees may be refundable. Id. &sect;&nbsp;7-1-1014; see id. &sect;&nbsp;7-1-1000(21).

ANY PROHIBITION OR SPECIAL RULES REGARDING LOAN APPLICATION, LOAN FEES OR COMMITMENT FEES

A lender would not be considered to be transacting business in the state of Georgia, and would not be required to qualify to transact business in the state of Georgia (assuming no other activities are conducted in the state of Georgia by the Lender), solely by reason of (a) making loans or creating or acquiring evidences of&nbsp;debt, mortgages, or liens on real or personal property; (b) securing or collecting debts or enforcing any rights from property; or (c) owning, without more, real or personal property. O.C.G.A. &sect;&nbsp;14-11-702.&nbsp;O.C.G.A. &sect;&nbsp;7-1-1000&nbsp;et seq. provides that persons acting as mortgage brokers or mortgage lenders in the state of Georgia may be subject to certain licensing requirements.

LENDER QUALIFICATION AND / OR LICENSURE

A modification of the loan and security instrument may potentially impact the priority of the existing security instrument and/or discharge sureties and guarantors if such modification is found by the courts to constitute a novation. Title endorsements and guarantor consents are recommended, particularly if material provisions (e.g., term, interest rate, etc.) are being amended. A modification which increases the principal balance of the obligations secured, or re-advances principal previously paid, may be subject to payment of additional intangible recording tax, regardless of whether the modification is recorded. See Ga. Dept. of Rev. Reg. Rule 560-11-8-.06. An additional issue results from the fact that Georgia still follows the equal dignity rule in some respects. See&nbsp;id.&nbsp;&sect; 10-6-2. Thus, if the original instrument is under seal, any modification thereof should also be under seal, though an unsealed modification of a sealed instrument will be valid unless its validity depends on its being under seal. See id.&nbsp;

UNUSUAL PROVISIONS OR REQUIREMENTS FOR MODIFICATION OF EXISTING MORTGAGE LOANS

Whenever the state uses funds from its hazardous waste trust fund to remediate a property, the expense is a debt that, together with interest, constitutes a lien on the contaminated property. O.C.G.A. &sect;&nbsp;12-8-96(e). To perfect the lien, the director of the Environmental Protection Division must file a claim of lien with the clerk of the Superior Court where the property is located. The claim must describe the property and a copy must be mailed to the owner and to other persons the director believes may be responsible for the cost of correcting the contamination. The lien is inferior to tax liens and other “prior perfected recorded liens or claims of record” but is superior to all other liens, and the lien cannot be divested by any transfer of title (including but not limited to a nonjudicial sale). Finally, the statute provides for a type of innocent owner defense in that the lien is not enforceable when the owner did not cause or contribute to the release, unless the owner knew or should have known by exercise of reasonable diligence that the release was occurring during the owner's ownership or had occurred before the owner acquired the property.

ENVIRONMENTAL LIENS

The Executive Committee of the Real Property Law Section of the State Bar of Georgia has approved and promulgated a model legal opinion for real estate secured transactions in Georgia. The model opinion is generally accepted by lenders if (1) the governing law of all of the documents is Georgia, and (2)&nbsp;all of the parties as to which opinions are given (borrower and guarantor) are organized in the state of Georgia. The 2009 opinion report, interpretive standards, and model opinion can be found at http://www.garealpropertylaw.com/uploads/9/4/1/6/94167071/2009_blacklinedreportonlegalopinions.pdf. The report was supplemented in 2014 and that supplement can be found at <a href="http://www.garealpropertylaw.com/uploads/9/4/1/6/94167071/legal_opinion_supplement__2014__ucc_article_9.pdf">http://www.garealpropertylaw.com/uploads/9/4/1/6/94167071/legal_opinion_supplement__2014__ucc_article_9.pdf</a>.

LEGAL OPINION

<ol start="361">
 <li> INCEPTION OF LIEN: Under Georgia law, construction contractors, subcontractors, land surveyors, engineers, foresters, architects, and materialmen (persons who furnish materials, including tools, appliances, machinery, or equipment used in making improvements to real estate) are granted a special lien on the real estate for which they furnish labor. O.C.G.A. &sect;&nbsp;44-14-361. A lien attaches when work begins on the property, or materials are furnished to the property, and the lien is perfected by the statutory filing procedure discussed below. E.g., Old Stone Mortgage & Realty Trust v. New Ga. Plumbing, Inc., 140 Ga. App. 686, 231 S.E.2d 785 (Ct. App. 1976). M&M liens are subject to various requirements (see generally id. &sect;&nbsp;44-14-361.1), and failure to comply with these requirements renders the lien invalid (although courts have on occasion granted some dispensation for certain technical failures). First, the lien claimant must substantially comply with his or her contract for construction, or for services, or for materials or machinery furnished. Second, the lien claimant must file a claim of lien in the office of the clerk of the superior court of the county where the property is located within 90 days after completion of the work or the furnishing of such services, material, or machinery. The claim of lien must include a statement regarding its expiration and a statement notifying the owner that he or she may contest the lien. Third, within 2 business days of filing the lien, the lien claimant must send a copy of the claim of lien by registered or certified mail, or by statutorily-approved overnight delivery service, to the owner of the property or to the general contractor as agent for the owner if the owner's address cannot be found. Finally, the lien claimant must commence an action for recovery of the amount claimed within 365 days after the claim of lien was filed for record. Additionally, within 30 days after commencing an action for recovery, the lien claimant must file a notice referencing certain information about the action and the property with the clerk of superior court in the county where the real property subject to the claim is located. Lien claimants may be excused from some of these requirements under certain circumstances set forth in the statute. The owner of the property against which a claim of lien is filed (or his or her agent or attorney) or the general contractor (or his or her agent or attorney) may file a notice of contest of lien with the clerk of superior court of the county in which the property is located. The notice must contain certain information and be in a certain font and style, and must be sent to the lien claimant within 7 days of filing via registered or certified mail, or via statutorily-approved overnight delivery service. A properly filed notice of contest cuts the lien claimant's time to commence an action on the lien to 90 days. If the lien claimant does not file within that time, the lien is extinguished. O.C.G.A. &sect;&sect;&nbsp;44-14-361, 44-14-361.1, & 44-14-368.</li>
</ol> B:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; PRIORITY AS TO REMOVABLE FIXTURES: Construction Lender vs. Lien Claimant: When a construction lender's deed to secure debt is filed for record prior to the commencement of construction or commencement of furnishing services or materials or machinery, the security title created by such deed to secure debt will have priority over subsequent M&M lien claims. Official Code of Georgia Annotated &sect;&nbsp;44-14-361.1(c) specifically lists all liens that have priority over M&M liens, and this list does not include mortgages. The distinction between deeds to secure debt and mortgages is important in Georgia, however, and construction lenders' security deeds have priority over M&M liens absent the construction lender having notice of the M&M lien claim. See, e.g., Ga. State Savings Ass'n v. Wilson, 189 Ga. 21, 5 S.E.2d 14 (1939). By contrast, if construction or furnishing services or materials or machinery is commenced prior to such filing by the lender of its deed to secure debt, the lien claimant will have priority over the deed to secure debt because the lender has notice of the existence of the claim. The fact that one lien claimant has or does not have priority over the lender's deed to secure debt has no bearing on the status of other lien claimants; some of them may have priority and some may not. See O.C.G.A. &sect;&sect;&nbsp;44-14-361.1(b) & (c); see generally id. 44-2-1 et seq. The deed to secure debt's priority is customarily established by affidavits from the owner that work, etc., has not commenced. In cases where a lien claimant has priority over the lender and this condition is ascertained early during construction, it usually is possible for the lien claimant and the lender to reach a mutually satisfactory agreement. In this event, the lien claimant may subordinate its lien to the lender's security title, typically in exchange for the lender's agreement to use the loan proceeds as needed to make or cause to be made the payments to which the lien claimant is entitled under its contract. Under O.C.G.A. &sect;&nbsp;44-14-366, a right to claim a lien may not be waived by the claimant in advance of furnishing the labor, services, or materials. There are detailed statutory requirements regarding the form, validity, and effect of waivers granted after the furnishing of labor, services, or materials commences. See id. Such waivers are effective against the claimant upon the earliest of the following to occur: actual receipt of funds in the amount set forth in the waiver; execution by claimant of a written acknowledgment of payment in full; and the passage of 60 days (unless the claimant files a lien of claim during that 60-day period). Construction Lender vs. Vendor of Fixtures: A perfected security interest in fixtures has priority over a construction lender holding a deed to secure debt where the security interest is a purchase money security interest and such security interest is perfected by a fixture filing before the goods become fixtures (or within 20 days thereafter). O.C.G.A. &sect;&nbsp;11-9-334(d). A security interest in fixtures has priority over a construction lender if the debtor has a right to remove the goods as against the construction lender. Id. &sect;&nbsp;11-9-334(f). A security interest in fixtures is subordinate to a construction lender whose deed to secure debt is recorded before the goods become fixtures if the goods become fixtures before completion of construction. Id. &sect;&nbsp;11-9-334(h).

LABOR AND MATERIALMEN'S LIEN CLAIMS - PRIORITY ISSUES

The form of loan title insurance policy typically issued is the 2021 ALTA Loan Policy.

FORM USUALLY REQUIRED BY LENDER

In Georgia, a wide variety of endorsements are available. The following is not an all-inclusive list, but it does set forth the endorsements most frequently requested. Street Assessments Endorsement (ALTA 1-06).&nbsp; Zoning and Zoning Completed Structure Endorsements (ALTA 3-06 and 3.1-06).&nbsp; Condominium Endorsement (ALTA 4-06 and 4.1-06).&nbsp; Planned Unit Development Endorsement (ALTA 5-06 and 5.1-06).&nbsp; Variable Rate Mortgage Endorsement (ALTA 6-06).&nbsp; Variable Rate - Negative Amortization Endorsement (ALTA 6.2-06).&nbsp; Environmental Protection Lien Endorsement (ALTA 8.2-06).&nbsp; Comprehensive Endorsement (ALTA 9-06 and 9.3-06).&nbsp; Tie-In Endorsement&nbsp;(ALTA 12-06).&nbsp; Future Advance Mortgage Endorsement (ALTA 14-06 and 14.1-06).&nbsp; Future Advance - Letter of Credit Endorsement (ALTA 14.2-06).&nbsp; Access and Entry Endorsement (ALTA 17-06 and 17.1-06).&nbsp; Utilities Access Endorsement (ALTA 17.2-06).&nbsp; Tax Parcel Endorsement&nbsp;(ALTA 18-06 and 18.1-06).&nbsp; Contiguity Endorsement (ALTA 19-06 and 19.1-06).&nbsp; First Loss Endorsement (ALTA 20-06).&nbsp; Doing Business (ALTA 24-06).&nbsp; Same as Survey (ALTA 25-06 and 25.1-06).&nbsp; Subdivision (ALTA 26-06).&nbsp; Usury (ALTA 27-06).&nbsp; Easement - Damage&nbsp;or Enforced Removal (ALTA 28-06).&nbsp; Interest Rate Swap (ALTA 29.1-06, 29.2-06 and ALTA 29.3-06.&nbsp; Commercial Participation Interest (ALTA 30.1).&nbsp; Severable Improvements (ALTA 31)&nbsp; Construction Loan (ALTA 32-06, 32.1-06, 32.2-06 and 33-06)&nbsp; Identified Risk (ALTA&nbsp;34-06)&nbsp; Minerals and Other Subsurface Substances (ALTA 35-06, 35.1-06, 35.2-06 and 35.3-06)&nbsp; Energy Projects (ALTA 36.1-06, 36.3-06, 36.5-06, 36.6-06 and 36.8-06)&nbsp; Assignment of Rents and Leases (ALTA 37-06)&nbsp; Mortgage Tax (ALTA 38-06)&nbsp; Commercial Lender Group (ALTA 42-06)&nbsp; Insured Mortgage Recording (ALTA 44-06)&nbsp; Pari Passu&nbsp;Mortgage (ALTA 45-06)&nbsp; &nbsp;

Georgia

Mortgage Law Summary

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Mortgage Law Summary for Georgia

Georgia

Mortgage Law Summary

Continue reading theMortgage Law Summary for Georgia

Continue reading the
Mortgage Law Summary for Georgia