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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

Louisiana

There are 3 distinct forms of contractual or “conventional” real estate mortgages recognized in Louisiana: ordinary conventional mortgages, collateral mortgages, and multiple indebtedness mortgages. An ordinary conventional mortgage may effectively secure only a single 1-time extension of credit evidenced by a promissory mortgage note. An ordinary conventional mortgage will not effectively secure multiple loans or other extensions of credit on a cross-collateralization basis, nor will an ordinary conventional mortgage effectively secure multiple loan advances under a revolving line of credit. There are 2 basic documents under an ordinary conventional mortgage--the real estate mortgage itself, and a real estate mortgage note. The mortgage must contain a full description of the mortgage note, including the note's amount and maturity date. Although no longer required, the mortgage note may also contain a special “stamp” or legend identifying or linking the mortgage note with the mortgage. This is known as a “paraph” and is headed by the Latin inscription “ne varietur.” On occasion, the mortgage note may be referred to as the “ne varietur note.” The FannieMae/FreddieMac Louisiana single family and multi-family mortgage forms are ordinary conventional mortgages. Multiple indebtedness mortgages are the preferred mortgage instrument to be used in Louisiana and may secure multiple extensions of credit on a cross-collateralized basis as well as multiple loan advances under a secured revolving line of credit. La. Civ. Code art. 3298. A multiple indebtedness mortgage differs from a collateral mortgage in that there is no need for a collateral mortgage note or for a collateral pledge/UCC security agreement. The mortgage directly secures multiple extensions of credit or multiple loan advances on a line of credit basis. Since it can secure multiple loan advances, the maximum amount secured is the amount required to be stated in this type of mortgage. Generally, an amount over and above the maximum principal amount of the credit facility is used since the maximum amount includes not only principal, but also interest, costs, fees and protective advances. Multiple indebtedness mortgages are widely used in Louisiana, even in connection with single 1-time extensions of credit when it may otherwise be appropriate to use an ordinary conventional real estate mortgage. Multiple indebtedness mortgages rank from time of filing. Except as otherwise expressly provided by law, both multiple indebtedness mortgages and collateral mortgages must be reinscribed within 10 years after the date of the instrument to maintain their effectiveness. La. Civ. Code art. 3357 et seq. A collateral mortgage is a form of conventional real estate mortgage that traditionally has been used to secure multiple extensions of credit on a cross-collateralized basis, multiple loan advances extended on a line of credit basis, as well as single 1-time extensions of credit. Collateral mortgages are subject to the “Mortgage” articles of the Louisiana Civil Code, Louisiana UCC Article&nbsp;9, and La. R.S. &sect;&sect;&nbsp;9:5550, et seq. There are 4 documents typically used under a collateral real estate mortgage set: (1)&nbsp;a collateral mortgage, which secures; (2)&nbsp;a collateral mortgage note payable to “bearer” on “demand,” with the collateral mortgage note generally being in an amount greater than the secured indebtedness, and with the collateral mortgage note then being pledged to the lender/mortgagee under; (3)&nbsp;a UCC security agreement prepared in accordance with Louisiana UCC Article&nbsp;9, which contains contractual language to the effect that the borrower/mortgagor is granting a possessory security interest in the collateral mortgage note to secure not only the primary extension of credit, but also any and all other present and future indebtedness the borrower may owe to the lender on a cross-collateralization basis, with such indebtedness typically being evidenced by; (4)&nbsp;1 or more “hand notes” constituting the actual principal obligation. The lien of a collateral mortgage will secure subsequent loan advances, as well as unrelated extensions of credit on a cross-collateralization basis, with retroactive priority back to the date that the collateral mortgage was recorded in the public records, or the date that the collateral mortgage note was delivered in pledge to the mortgagee/lender, whichever is the later to occur, provided that: (a)&nbsp;the mortgagor's UCC security agreement provides that the pledge of the collateral mortgage note secures other or future indebtedness on a cross-collateralization basis; (b)&nbsp;the collateral mortgage note is constantly held in pledge by the mortgagee; (c)&nbsp;the mortgage is granted in good faith and not in an attempt to fraudulently defeat the interests of other creditors; and (d)&nbsp;the initial loan advance was made at the time the mortgage was granted or, at minimum, an enforceable commitment to extend credit to the borrower existed at that time. Typically, many lenders will lend $100 non-interest bearing at the time of the delivery of the mortgage note to ensure UCC “value” is given. At one time, collateral mortgages were widely used in Louisiana. While a limited number of lenders continue to use collateral mortgages, they have been increasingly displaced by multiple indebtedness mortgages. On January 1, 2015, the laws were revised on assignment of leases and rents as well as revising the law of pledge. Most of the law governing the assignment of leases and rent that was formerly found in LA. R.S. &sect;&nbsp;&sect;&nbsp;9:4401-4403 was revised and moved to new Title XX-A, “Pledge” in the Louisiana Civil Code, containing Articles 3141 to 3175. According to La. Civ. Code art. 3142, a lessor's rights in a lease and its rents of an immovable are things that may be pledged. In addition, according to La. Civ. Code art. 3141, a pledge is defined as a real right established by contract over property, including a lessor's rights in a lease and its rents, to secure the performance of an obligation. (The lessor's rights in the lease of movable property continue to be encumbered under the Uniform Commercial Code). The place for filing of the pledge of leases and rents (formerly called “assignment of leases and rents”) has been changed from the conveyance records to the mortgage records. La Civ. Code art. 3346. Now the place of recordation is the same for both mortgages and pledges—the mortgage records of the parish in which the immovable is located. The rules pertaining to the recordation and reinscription of a pledge of the lessor's right in the lease of an immovable and its rents are now located in La. Civ. Code arts. 3338 through 3368 and La. R.S. &sect;&nbsp;9:4403(B).

SECURITY INSTRUMENT USED

In order to ensure validity and enforceability, Louisiana real estate mortgages generally require that: (1)&nbsp;the mortgage is in writing; (2)&nbsp;the mortgage is signed by the mortgagor; (3)&nbsp;the mortgage contains appropriate appearance language, including the mortgagor's marital status if an individual; (4)&nbsp;the mortgage contains a description of the secured indebtedness, including the amount and maturity date of the mortgage note, if applicable; (5)&nbsp;in the case of a collateral mortgage, the mortgage states the fact that the collateral mortgage note is payable “on demand”; (6)&nbsp;in the case of a multiple indebtedness mortgage, the mortgage states the maximum amount of indebtedness that the mortgage secures; (7)&nbsp;the mortgage contains a full legal description of the mortgaged property, including the street address of the property to the extent appropriate; and (8)&nbsp;if the mortgage is taken on the mortgagor's personal residence, the mortgage contains a waiver of homestead exemption. Real estate mortgages may be executed either in “authentic form” in the presence of a notary public and 2 witnesses, or in “acknowledged form” executed in the presence of 2 witnesses, either 1 of whom or the mortgagor subsequently appears before a notary to execute a separate acknowledgment included in the mortgage document. Most Louisiana real estate mortgages are executed in authentic form since executory process foreclosure remedies (Louisiana's quicker version of judicial foreclosure) are available only in connection with authentic forms of mortgages and only those forms are self-proving. Louisiana Code of Civil Procedure Article 2631 et seq. Conventional real estate mortgage and collateral mortgage notes are no longer required to be paraphed “ne varietur” for identification with the borrower's mortgage in order for the lender to be entitled to foreclose against the mortgaged property utilizing Louisiana executory process procedures. While some notaries continue to paraph conventional real estate mortgage notes and collateral mortgage notes “ne varietur” for identification with the mortgage, this practice is customary rather than required. Promissory notes secured by Louisiana multiple indebtedness mortgages should never be paraphed “ne varietur” for identification with the mortgage. In order to be effective against third parties, a Louisiana real estate mortgage must be recorded (filed) in the mortgage records of the parish where the mortgaged property is located. Real estate mortgages are recorded with the local clerk of court. Recordation fees vary from parish to parish, and depend upon the form of mortgage being recorded, as well as the number of pages included in the mortgage instrument and in exhibits and attachments thereto. Parish clerks of court are allowed to accept electronic filings if the local clerk establishes such a system. La. C.C.P. art 258. All mortgages now require that the notary's bar roll or notary no. be included in notary block, but the failure to include does not affect the validity of the act. Mortgages of 1-4-family residential property insured by a lender's title policy are required to contain identifying information about the title insurance provider, underwriter, and Louisiana attorney who provided the title opinion on which title policy was based. LA. R.S. &sect;&nbsp;&sect;&nbsp;22:513.1. Failure to insert information does not affect the act's validity, however.

RECORDING REQUIREMENTS

Well drafted Louisiana mortgages include waivers of (1)&nbsp;the benefit of appraisement of property in the event of its seizure and sale under judicial process, as provided by Articles 2332, 2336, 2723 and 2724, Louisiana Code of Civil Procedure; (2)&nbsp;the 3 days delay provided by Articles 2331 and 2722, Louisiana Code of Civil Procedure; and (3)&nbsp;the benefits of the other provisions of Articles 2331, 2722 and 2723, Louisiana Code of Civil Procedure. Waiver of notice of seizure is often included but that right is not waivable under Louisiana Code of Civil Procedure Article 2721.

STATUTES TO BE WAIVED

None. SECURING FUTURE ADVANCES:&nbsp; La. Civ. Code art. 3298 specifically provides that a mortgage may secure obligations that may arise in the future (i.e. obligations now existing or thereafter arising).&nbsp; A multiple indebtedness mortgage or mortgage that may secure an obligation in the future, must provide that it secures obligations that may arise in the future and state the maximum amount of the obligations that may be outstanding from time to time that the mortgage secures as provided for in La. Civ. Code art. 3288.

UNUSUAL TREATMENT OF STANDARD PROVISIONS

Louisiana law specifically provides that unless otherwise provided by the parties thereto, a mortgage will secure, without further action, additional funds that may be advanced by the mortgagee for the protection, preservation, repair or recovery of the mortgaged property and that such additional sums advanced by the mortgagee shall bear interest at the rate provided under the mortgage note until repaid in full by the mortgagor. La. R.S. &sect;&nbsp;9:5389. Louisiana Civil Code requires statement of a maximum amount however. La. Civ. Code art. 3288; to satisfy this requirement, many Louisiana mortgages have a clause indicating that all discretionary advances by the lender are secured by the mortgage in an amount equal to a percentage (often 25%) of the face amount of the mortgage.

SECURING ADDITIONAL ADVANCES TO PROTECT THE COLLATERAL

Deeds of trust are not recognized in Louisiana.

TRUSTEE UNDER DEED OF TRUST

Louisiana law generally prohibits self-help remedies following borrower defaults as being contrary to Louisiana public policy considerations. Louisiana also does not permit the exercise of default remedies under “powers of sale.” There are 2 primary remedies available to a secured mortgage lender following the borrower's default and acceleration of the underlying mortgage note: ordinary collection actions, and the commencement of an executory process foreclosure. A mortgage lender may file an ordinary collection lawsuit against the borrower and obtain a final judgment for the amount of the secured indebtedness, with the judgment further recognizing the validity and enforceability of the mortgage. The lender may then enforce its judgment by having the mortgaged property seized by the sheriff of the parish where the property is located and then sold at judicial sale after due advertisement and public notice. It also is possible to have the mortgaged property seized prior to judgment by use of prejudgment sequestration procedures in which the sheriff or a keeper appointed is granted possession and control of the property upon showing to the court that it is within the power of the defendant to conceal, dispose, or waste the property or revenues therefrom. Louisiana Code of Civil Procedure Article 3571 et seq., and 326 et seq. In the alternative, a mortgage lender may foreclose against the mortgaged property under Louisiana executory process procedures. Executory process is a quick method of foreclosure authorized under Louisiana law. La. Code Civ. Proc. arts. 2631 et seq. Following the borrower's default and the lender's election to accelerate the maturity of the underlying mortgage note or secured indebtedness, the lender may file an executory process petition before a court of competent jurisdiction in the parish where the mortgaged property is located. After presenting a prima facia case, the lender may obtain a court order or “writ” directing the sheriff of a parish to seize the mortgaged property and then to sell the property at judicial sale after proper advertisement and public notice. The borrower is then notified of the property's seizure and has the opportunity within a specific time period to attempt to enjoin the foreclosure sale. Executory process remedies are available only if (a)&nbsp;the mortgage is executed in authentic form in the presence of a notary and 2 witnesses, and (b)&nbsp;the mortgage contains a consent to foreclosure under Louisiana executory process procedures, including a confession of judgment and an acknowledgment of indebtedness on the part of the borrower/mortgagor. Corporate borrowers are further required to provide certified borrowing resolutions specifically authorizing execution of mortgages containing usual customary security clauses. For partnerships as well as for limited liability partnerships and limited liability companies, the articles of organization must be checked to confirm authority to enter into mortgage transactions. La. Civ. Code art. 2814 and La. C.C.P. art. 2636(6) and (7). Executory process is viewed as a harsh remedy under Louisiana law, and the requirements for executory process foreclosures are strictly enforced by the courts. Certain reproduction of records of financial institutions as originals is authorized. La. R.S. 13:3733.1E, La. Civil Code Procedure arts. 2636 and 2637. A contested ordinary collection foreclosure may take 1 or more years to complete. A non-contested executory process foreclosure may take 60-120 days to complete. At the lender's option, and assuming the right of appraisal is waived in the mortgage, the seized property may be sold at judicial sale with or without benefit of appraisal. If the seized property is sold with benefit of appraisal, the property must be appraised prior to sale by 2 qualified appraisers, 1 appointed by the creditor and 1 by the borrower. The sheriff will appoint the appraisers if the parties do not. If these 2 appraisers do not agree, the sheriff will appoint a third appraiser whose opinion as to the value of the property will be final. The property must be sold for the greater of 2/3 of its appraised value or the value of superior liens. If there is no bid for the property equal to 2/3 of its appraised value, the lender may elect to halt the sale and re-advertise the property. The property may then be sold at a second judicial sale for any amount (as long as the bid price exceeds any superior liens), but in that event the creditor must give the borrower credit in an amount generally equal to &frac12; of the property's appraised value. Article 2336 Louisiana Code of Civil Procedure. The property will be sold subject to any liens or encumbrances superior to the mortgage of the seizing creditor. If the borrower waives the right to an appraisal and the lender elects to have the property sold at judicial sale without benefit of appraisal, the property may be sold at judicial sale to the highest bidder for any price that is sufficient to pay the higher of costs of the sale or superior liens. However, the creditor will not be entitled to a deficiency claim against the debtor if the sale of the property does not satisfy the outstanding indebtedness. Again, the property will be sold subject to any senior liens. There is, however, a mechanism for a lender to preserve a deficiency judgment with a debtor through a post-default agreement; the statutory requirements are strictly construed against lenders, require a written agreement, and there are different requirements for commercial and consumer transactions. See La. R.S. 13:4108.1 and 4108.2.

BRIEF DESCRIPTION OF PROCEDURE

Louisiana law does not give the borrower to right to redeem mortgaged real estate once the property is sold at judicial foreclosure sale.

REDEMPTION PERIOD AND PRICE

&nbsp; Since there is no redemption period, waiver is not applicable.

WAIVER OF REDEMPTION; REDUCTION OF REDEMPTION PERIOD

Deficiencies are subject to the Louisiana Deficiency Judgment Act. La. R.S. &sect;&sect;&nbsp;13:4106 et seq. For a mortgage lender to be entitled to collect a deficiency from the borrower, it is necessary that the mortgaged property be sold at judicial sale with the benefit of appraisal for at least 2/3 of its appraised value. If no one bids 2/3 of the property's appraised value at the initial judicial sale, the lender may elect to halt the sale and re-advertise the property. The property may then be sold at a second judicial sale for any amount, in which event the creditor must give the borrower credit in an amount generally equal to &frac12; of the property's appraised value. In order to collect a deficiency following a Louisiana executory process foreclosure, it is necessary for the mortgage lender to either “convert” the case to ordinary proceedings or to file a separate ordinary collection lawsuit against the borrower before a court of competent jurisdiction and to obtain a final judgment for the deficiency amount. “Work-outs” are allowed under Louisiana law that will allow a lender to retain a deficiency judgment, but the requirements are strictly construed against lenders and require a written agreement, and there are separate requirements for commercial and consumer transactions. R.S. 13:4108.1 and 4108.2.

DEFICIENCIES

The judicial sale of mortgaged property transfers to the purchaser all of the rights and claims of the debtor as completely as if the debtor had sold the property to the successful purchaser. The property is transferred subject to any real charge or lease with which it is burdened that is superior in rank to the mortgage of the seizing creditor. The foreclosure sale will however, extinguish inferior liens, mortgages, and leases provided those inferior creditors were given proper prior notice of the sale in accordance with the relevant Federal due process cases. See Magee v. Amiss, 502 So.2d 568 (La. 1987), and Sterling v. Block, 953 F.2d 198 (5th Cir. 1992).

EFFECT OF FORECLOSURE UPON LEASES

There have been no changes to the foreclosure process resulting from recent foreclosure litigation.&nbsp;

CHANGES TO FORECLOSURE PROCESS

As a general rule, there are no limitations on the rates and amounts of interest, points, origination fees, prepayment penalties, and other fees and charges that may be contracted for, assessed, and collected in connection with commercial real estate loans, credit sales, leases, and other financing transactions (subject to the exceptions set forth below). La. R.S. &sect;&nbsp;9:3509(A), which supersedes the 12% per annum interest rate limitations of La. R.S. &sect;&nbsp;9:3500 and 9:3503.

USURY CEILING

Interest may not begin to accrue on a commercial real estate loan until such time as the loan proceeds are made available for disbursement. La. R.S. &sect;&nbsp;9:3506.1. This exception also applies to consumer real estate loans. Default interest on fixed rate commercial real estate loans of $250,000 or less, is limited to a maximum of 3% in excess of the original, fixed contract rate of interest, or 18% per annum, whichever is greater; and default interest on commercial real estate loans in excess of $250,000, is limited to a maximum of 3% in excess of the original, fixed contract rate of interest, or 21% per annum, whichever is greater. La. R.S. &sect;&nbsp;9:3509(B). This limitation applies only to fixed rate mortgage loans, and does not apply to variable rate loans. Capitalized negative interest amortization in connection with “graduated payment” mortgage loans, is limited to a maximum of 50% of the original principal amount of the mortgage note. La. R.S. &sect;&nbsp;9:3504(C). Prepayment penalties with respect to commercial loans secured by mortgages on rural properties are limited to a maximum of 5% of the loan balance if the loan is prepaid in full within the first year of its term; 4% if the loan is prepaid in full within the second year of its term; 3% if the loan is prepaid in full within the third year of its term; 2% if the loan is prepaid in full within the fourth year of its term; and 1% if the loan is prepaid in full within the fifth year of its term, with no prepayment penalties after the fifth year. La. R.S. &sect;&nbsp;9:5324. Enforcement attorneys' fees in Louisiana are limited are reasonable fees and charges as determined by the court. Contractual, fixed percentage attorneys' fee covenants (e.g., 10% of the loan balance at the time of default) are unenforceable. This exception also applies to consumer real estate loans. Interest and other applicable fees and charges must be contracted for in writing in order to be assessed. This exception also applies to consumer real estate loans. Interest on interest, or compounded interest, is permitted in connection with commercial real estate loan transactions. La. R.S. &sect;&nbsp;9:3509.2(2).

USURY EXCEPTIONS

Reverse Mortgages: Reverse mortgages are regulated under provisions of La. R.S. &sect;&sect;&nbsp;6.

Reverse Mortgages

Closed-end Consumer Real Estate Loans: Unless the borrower's note contains a contractual covenant contracting the loan under the Louisiana Consumer Credit Law (discussed below), closed-end consumer real estate loans are subject to the Louisiana Residential Mortgage Lending Act (La. R.S. &sect;&sect;&nbsp;6:1081, et seq.) (the “RMLA”). There are no limitations on the rates and amounts of interest, points, origination fees, and other fees and charges that may be contracted for, assessed and collected in connection with federally related mortgage loans to Louisiana consumers. La. R.S. &sect;&sect;&nbsp;6:1096(A) and 1097(A). Interest on consumer residential mortgage loans, other than federally related mortgage loans, is limited to a maximum of: 36% per annum on the first $1,400 borrowed; 27% per annum on the next $2,600 borrowed; 24% per annum on the next $3,000 borrowed; and 21% per annum on all amounts borrowed in excess of $7,000. Interest may include points and other prepaid finance charges provided that the Annual Percentage Rate does not exceed the foregoing aggregate limits. Late charges on residential mortgage loans are limited to a maximum of 5% of the delinquent amount if the installment payment is not paid when due. La. R.S. &sect;&nbsp;6:1097(B)(2). NSF check charges are limited to a maximum of 5% of the dishonored check, or $25, whichever is greater. La. R.S. &sect;&nbsp;6:1097(B)(6). Prepayment penalties are limited to a maximum of 5% of the loan balance if the loan is prepaid in full in the first year of its term; 4% if the loan is prepaid in full within the second year of its term; 3% if the loan is prepaid in full within the third year of its term; 2% if the loan is prepaid in full within the fourth year of its term; and 1% if the loan is prepaid in full within the fifth year of its term, with no prepayment penalties after the fifth year. La. R.S. &sect;&nbsp;6:1096(E). Additional fees and charges not listed above are permitted to the extent that they are not considered to be a “finance charge” under the Federal Truth in Lending Act and Regulation Z, and to the extent that the borrower agrees in writing to pay such fees and charges. La. R.S. &sect;&nbsp;6:1097(B)(7).

Closed-end Consumer Real Estate Loans

Consumer Home Equity Lines of Credit: Open-end credit, consumer home equity lines of credit (“HELOC's”) are subject to the RMLA, unless contracted under the Louisiana Consumer Credit Law (La. R.S. &sect;&sect;&nbsp;9:3510 et seq.) (the “LCCL”). Interest on consumer HELOC subject to the RMLA is limited to the greater of 21% per annum, or 15% in excess of the Federal Reserve Board's Discount Rate. Late charges, NSF check fees, and prepayment penalties are limited to the same amounts as discussed above for closed-end RMLA consumer residential mortgage loans. Unlike the LCCL discussed below, the RMLA does not permit the assessment of additional origination fees in connection with consumer open-end credit HELOC accounts. Interest on consumer HELOC accounts contracted under the LCCL is limited to the same 36%, 27%, 24%, and 21% maximum aggregate rates as provided above. La. R.S. &sect;&sect;&nbsp;9:3519(A) and (D). HELOC lenders additionally may assess up to a 2% origination fee at the time the consumer's HELOC account is established. La. R.S. &sect;&nbsp;9:3530(D). Late charges under the LCCL are limited to a maximum of 5% of the amount delinquent, or $10, whichever is greater, provided that the payment is not made within 10 days of when due. La. R.S. &sect;&nbsp;9:3527(A). NSF check fees are limited to 5% of the amount of the dishonored check, or $25, whichever is greater. To make a HELOC loan subject to LCCL, appropriate choice of law (statute) language must be included in the consumer's HELOC account agreement.

Consumer Home Equity Lines of Credit

Consumer Seller Financing Transactions: Interest on consumer seller financing transactions (i.e., when a homeowner sells residential property to a consumer purchaser on credit) is limited to a maximum of 17% per annum. La. R.S. &sect;&nbsp;9:3504(D).

Consumer Seller Financing Transactions

Louisiana has a “local filing/central registry” UCC filing system. UCC-1 financing statements must be filed on the local parish level and may not be filed directly with the Louisiana Secretary of State. A financing statement, including a fixture filing, may be filed with any of the 64 Louisiana parish clerks of court. Secured lenders have the option of filing UCC-1 financing statements in any local parish of their choice and now an initial financing statement can be submitted to any Louisiana parish clerk of court online through the Louisiana Secretary of State's website. There is no requirement that UCC financing statements be filed in the parish where the debtor resides or where the collateral is located. Dual filings in more than one parish are never required. Once a filing has been made in any single parish, it is effective on a statewide basis. This is possible since the local filing officer electronically transmits the filed information directly into the Secretary of State's master UCC computer index. While lenders have the option of filing UCC-1 financing statements in any of the 64 Louisiana parishes, the lender must return to the same parish when filing a UCC-3 form as an amendment, continuation statement, assignment, termination statement, or partial release. The basic fee for filing a UCC-1 financing statement is $30. Additional fees may be assessed depending on the circumstances. Termination fees must generally be prepaid in advance at the time the debtor's UCC-1 financing statement is filed. The Louisiana UCC provides that lenders may request a statewide UCC search by filing a UCC-11 form with the clerk of court of any of the 64 Louisiana parishes. UCC search requests may not be directly submitted to the Louisiana Secretary of State. Copies of the actual UCC filing may only be obtained from the filing office of the parish where the filing originally was made. As an exception, UCC filings affecting titled motor vehicles (automobiles, trucks, motorcycles, recreational vehicles and boat trailers), as well as non-immobilized manufactured homes, must be made with the Louisiana Department of Public Safety and Corrections, Motor Vehicle Division, which will then note the lender's perfected lien on the vehicle's or manufactured home's certificate of title pursuant to the Louisiana Motor Vehicle Certificate of Title Act (La. R.S. &sect;&sect;&nbsp;32:701 et seq.). UCC-1 financing statements filed with the Louisiana Department of Public Safety must contain a description of each secured vehicle/manufactured home, including make or manufacturer, year of manufacture, model, body style, and manufacturer's serial or identification number. Termination fees need not be prepaid in advance in connection with financing statements affecting titled motor vehicles and manufactured homes filed with the Louisiana Office of Motor Vehicles.

LOCATIONS FOR FILING

The Louisiana UCC limits the definition of “fixtures” to goods, other than consumer goods and manufactured homes, that after placement on or incorporation into an immovable (real property) have become a component part of the immovable as provided in La. Civ. Code arts. 463, 465, and 466, or that have been declared to be a component part of an immovable under Article 467. La. R.S. &sect;&nbsp;10:9-102(a)(41). Unlike the multistate version of the Code, the Louisiana definition of “fixtures” does not extend to consumer goods, or to manufactured homes, or to goods that have already been installed or attached so as to become a part of the realty. La. R.S. &sect;&sect;&nbsp;10:9-102(a)(40) and (41). To be a valid Louisiana fixture filing, the UCC filing must be made before the items are attached to the immovable property. Post attachment fixtures in Louisiana may only be encumbered by a Louisiana real estate mortgage on the entirety of the immovable property. One cannot perfect a security interest in fixtures in Louisiana by filing a real estate mortgage in the mortgage records of the parish in which the real estate is located. Fixture filings in Louisiana are not filed in the real estate mortgage records, but instead are filed in the same manner as ordinary UCC-1 filings. Non-Louisiana lenders and their attorneys often are confused by the Louisiana fixture filing rules, and commonly attempt in error, to make fixture filings in parish real property (mortgage) records. It is recommended that lenders take additional UCC security interests in equipment when taking mortgages on Louisiana properties because litigation may ensue on whether the item is a “fixture” (that is, a component part under the Louisiana Civil Code); if the item is held not to be a component part, then it is not a fixture and would therefore be classified as equipment.

SECURITY INSTRUMENT USED AS FIXTURE FILING

Guaranties are addressed by Articles 3035 to 3070 of the Louisiana Civil Code on suretyship. A suretyship is as an accessory contract by which a person binds himself to a creditor to fulfill the obligation of another upon the failure of the latter to do so. La. Civ. Code art. 3035. A suretyship must be express and in writing and may otherwise be qualified, conditioned or limited in any lawful manner. In Louisiana, the common law concept of joint and several liability is referred to as “in solido” or solidary liability; however, it is difficult to get common law “joint and several” treatment because of Louisiana Civil Code article 3037, which requires that a contract be treated as a suretyship if the lender knows of the true relationship of the parties or if the document reveals that its cause is to secure the debt of another.

UNUSUAL PROVISIONS OR REQUIREMENTS

None.&nbsp; Under Louisiana law, a guaranty may be enforced separately from the mortgage in an ordinary proceeding.

SPECIAL PROBLEMS IN ENFORCEMENT

&nbsp; Deficiencies are subject to the Louisiana Deficiency Judgment Act. La. R.S. &sect;&sect;&nbsp;13:4106 et seq. For a mortgage lender to be entitled to collect a deficiency from the borrower, it is necessary that the mortgaged property be sold at judicial sale with the benefit of appraisal for at least 2/3 of its appraised value. If no one bids 2/3 of the property's appraised value at the initial judicial sale, the lender may elect to halt the sale and re-advertise the property. The property may then be sold at a second judicial sale for any amount, in which event the creditor must give the borrower credit in an amount generally equal to &frac12; of the property's appraised value. In order to collect a deficiency following a Louisiana executory process foreclosure, it is necessary for the mortgage lender to either “convert” the case to ordinary proceedings or to file a separate ordinary collection lawsuit against the borrower before a court of competent jurisdiction and to obtain a final judgment for the deficiency amount.

ISSUES AND GUIDELINES RELATED TO SEEKING/OBTIAINING DEFICIENCY JUDGEMENTS

Once properly recorded, an ordinary conventional mortgage will remain valid and effective as to third persons for 10 years after its date of execution. If the mortgage note has a payment term of 9 years or longer, a recorded mortgage describing the mortgage note's maturity date will remain valid and effective for 6 years after the note's described maturity date. La. Civ. Code art. 3358. Once properly recorded, a collateral mortgage or a multiple indebtedness mortgage will remain valid and effective as to third persons for 10 years after date of execution. Also art. 3357. To continue the validity and effectiveness of a Louisiana real estate mortgage, it is necessary to “reinscribe” the mortgage by filing a simple written notice of reinscription with the appropriate filing office setting forth the mortgagor's name, the mortgagee's name, the original mortgage's recordation number, and a statement that the mortgage is being reinscribed. La. Civ. Code art. 3362. Once properly reinscribed, a Louisiana mortgage will continue to be valid and effective for an additional 10-year term. La. Civ. Code art. 3364.

STATUTE OF LIMITATION PERIOD

When a mortgage loan has been paid in full, the lender is required to cancel the mortgage within 30 days of the date the loan is paid or prepaid. La. R.S. &sect;&nbsp;9:5385. Special procedures must be followed to cancel a mortgage when the mortgage lender is unable to locate the original paraphed note or when the paraphed note has for some reason been destroyed. La. R.S. &sect;&sect;&nbsp;9:5167(E) and 9:5168. There also are special procedures that apply to cancellation of multiple indebtedness mortgages. La. R.S. &sect;&nbsp;9:5557. La. R.S. &sect;&nbsp;9:5169 and 9:5172, specifically 9:5173, provides a form cancellation request by licensed financial institutions.

REQUIREMENT FOR RELEASE OF LIEN

Certain assets in Louisiana are exempt from seizure to satisfy the claims of general unsecured creditors. These include, by way of example, certain furniture and personal household items, tools of the trade, and the proceeds and cash surrender value of life insurance and annuity contracts. La. R.S. &sect;&nbsp;13:3881. These exemptions usually do not apply to secured creditors who have valid contractual security interests. La. R.S. &sect;&nbsp;20:1 exempts from seizure the first $35,000 in equity in the family home. This “homestead exemption” may be waived by the mortgagor in a mortgage secured by the mortgagors' home, and Louisiana mortgages typically contain a waiver of this homestead exemption. La. R.S. &sect;&nbsp;13:3851.1 prohibits the seizure or sale of a homestead in execution of a judgment for consumer credit card debt.

HOMESTEAD ISSUES

Louisiana is a community property state with equal management authority allowing each spouse to enter into debt obligations. La. Civ. Code art. 2334, et seq. The consent of both husband and wife is necessary as a general rule to encumber or alienate community real estate. A Louisiana mortgage must be executed by both spouses as to community property. This includes a non-borrowing spouse. Likewise, a non-borrowing spouse is often required to intervene and waive the homestead exemption from seizure as to separate property that may be considered the homestead of the non-borrowing spouse, although this is not required under La. R.S. &sect;&nbsp;20:1 D.

COMMUNITY PROPERTY

There is no mortgage tax in Louisiana.

MORTGAGE TAX

The City of New Orleans imposes a documentary transfer tax on “any instrument, act, writing or document creating, transferring, alienating, leasing or otherwise affecting any right in or to immovable property located in the Parish of Orleans.” The amount of the tax depends upon the number of pages included in the recorded document. The base tax is $325 for documents of up to 10 pages in length, plus an additional tax of $100 for each page in excess of 10, up to a maximum tax of $2,525. These fees apply only in Orleans Parish.

DOCUMENTARY STAMP TAX

&nbsp;There is no transfer tax in Louisiana.&nbsp;

TRANSFER TAX

Louisiana courts are instructed to honor contractual choice of law covenants whereby the parties agree that the substantive laws of another state will govern the transaction. Nevertheless, Louisiana courts may refuse to honor choice of law covenants in contracts that would otherwise be governed by Louisiana law when the laws of the chosen state conflict with Louisiana public policy considerations. La. Civ. Code art. 3540. Choice of law covenants apply only to substantive law and do not extend to laws governing remedies and enforcement of rights. Louisiana courts will always apply Louisiana procedural and remedial law under such circumstances. Out-of-state choice of law covenants included in mortgages affecting Louisiana properties, as well as in pledges of Louisiana leases and rents, are unenforceable. Louisiana law exclusively governs real rights to property located in the state.

ENFORCEABILITY OF AGREEMENT OF BORROWER AND LENDER AS TO CHOICE OF LAW PROVISIONS

A Louisiana mortgage typically provides for the appointment of a keeper in the event the property affected by the mortgage is seized. La. R.S. &sect;&nbsp;9:5136. The keeper can be expressly identified or the method by which the keeper is to be appointed can be described. The keeper must act as a prudent administrator, has full powers to manage and administer the seized property and may operate the seized property in the ordinary course of business. The keeper may apply to the court to take actions outside the ordinary course of administration or management in order to preserve and protect the seized property. The keeper is not entitled to any fees for his services unless he was particularly identified by the parties in the mortgage and the manner of determining his compensation was provided for in the mortgage.

RECEIVERSHIP

As a general rule, there are no limitations on the rates and amounts of points, origination fees, prepayment penalties, and other fees and charges that may be contracted for, assessed and collected in connection with commercial real estate loans. The rules for consumer real estate loans are different and discussed in the Usury section.

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

There are no special licensing requirements for lenders to make loans in Louisiana.&nbsp; All mortgage brokers, originators and mortgage companies conducting business in Louisiana must be licensed as provided for in La. R.S. 9:3572.1-12.

LENDER QUALIFICATION AND/OR LICENSURE

If a note is validly extended the mortgage will likewise be extended. La. R.S. &sect;&sect;&nbsp;9:5390. Recordation of any modification agreement that extends the term of the mortgage is necessary to extend the original effectiveness of the mortgage inscription. La. C.C. art. 3361.

MODIFICATION

Louisiana's hazardous substance law provides that once funds are expended by the state a lien or privilege may be perfected against immovable property by a filing in the mortgage records in which the property is located. La. R.S. &sect;&sect;&nbsp;30:2271, 30:2281, 30:2225.

ENVIRONMENTAL LIENS

The Louisiana State Bar Association has not published a report articulating standard accepted procedures and protocols in the area of opinion letter practice. LABOR AND MATERIAL LIEN CLAIMS—PRIORITY ISSUES:

LEGAL OPINIONS

The Louisiana Private Works Act, La. R.S. &sect;&sect;&nbsp;9:4801 et seq. provides for privileges (liens) in favor of persons who perform work or supply labor or materials in connection with the construction improvement of buildings or other structures. Such privileges arise and are effective as to third persons at the earlier of (a)&nbsp;when the work is begun by placing materials or commencing work at the worksite, or (b)&nbsp;a filing of a notice of contract. Private Works Act privileges are superior to a perfected mortgage on the property unless the mortgage is recorded before Private Works Act liens are effective. A prior recorded mortgage will outrank materialmen privileges, but will be junior and inferior to liens in favor of taxing authorities for unpaid ad valorem taxes and special assessments and inferior to laborers' liens. The fact that privileges under the Private Works Act can arise without recordation poses a problem for the potential mortgagee who wishes to insure its priority. A lender acquiring a mortgage on real estate may conclusively rely upon a “no work” affidavit: an affidavit made by a registered or certified engineer or surveyor or a licensed architect that states he or she inspected the property at a specified time, and that work has not then been commenced, nor materials placed at the site. This affidavit must be filed in the parish mortgage records within 4 business days after its execution, and the mortgage must be filed of record before or within 4 business days after filing of the affidavit. Note: Although the Private Works Act privileges can come into existence without any filing, a filing is necessary in order to perfect such rights and render them enforceable; that filing, however, may not occur until after the job is complete, so a lender making a loan secured by a mortgage cannot know, by looking at the public records, whether a later-filed materialman's lien will outrank the mortgage; the only “safe harbor” for the lender is to obtain and timely file the “no work” affidavit.

INCEPTION OF LIEN

There is no separate priority other than the Private Works Act for “removable fixtures” that become component parts of the immovable (real) property before a timely UCC security interest is taken in the fixtures, for Louisiana law precludes the taking of a UCC security interest in fixtures once they become a component part of immovable (real) property. Further, even a timely filed UCC “fixture” filing is not effective against fixtures on consumer property.

PRIORITY AS TO REMOVABLE FIXTURES

The American Land Title Association (ALTA) forms are the standard forms used in Louisiana for title insurance policies. Lenders customarily require the ALTA Loan Policy.

FORM USUALLY REQUIRED BY LENDER

There are a number of form endorsements to cover particular situations in Louisiana, but endorsements can be drafted to cover a particular need of the insured. Virtually all of the ALTA form endorsements, and numerous special endorsements, are available on request. Some of the more standard form endorsements customarily used in Louisiana are: (1)&nbsp;encroachment endorsements; (2)&nbsp;endorsements relative to building restrictions; (3)&nbsp;endorsements insuring against assessments for street improvements; (4)&nbsp;usury endorsements; (5)&nbsp;variable or floating interest rate endorsements; (6)&nbsp;environmental protection lien endorsements; (7)&nbsp;access endorsement; (8)&nbsp;separate tax parcel endorsements; (9)&nbsp;contingency endorsements; (10)&nbsp;collateral mortgage endorsement; and (11)&nbsp;multiple indebtedness mortgage endorsements.

ENDORSEMENTS AVAILABLE

R.S. &sect;&sect;&nbsp;22:512 requires an opinion of a Louisiana attorney for the issuance of all policies of title insurance covered by Louisiana property. The statute also promulgates minimum title search period requirements.

TITLE OPINION AND SEARCH REQUIREMENTS

The Louisiana UCC does not permit traditional self-help repossession remedies with regard to non-possessory goods. Self-help remedies generally are prohibited in Louisiana as being contrary to state public policy consideration. As an exception, self-help remedies are available in certain limited circumstances with respect to motor vehicle collateral, and as a result of post default workout and forbearance agreements. Out-of-state lenders are warned not to attempt to pursue self-help remedies against non-possessory goods located in Louisiana, even with regard to UCC-secured collateral moved from other states. Offending lenders may be exposed to potential civil penalties for wrongful repossession, as well as potential criminal penalties based on theft, conversion, and trespass. The preferred method of foreclosing against non-possessory goods in Louisiana is by: (1)&nbsp;filing an appropriate executory process foreclosure action against the debtor before a court of competent jurisdiction; and (2)&nbsp;after presenting a prima facia case before the court, obtaining a writ of seizure and sale; and (3)&nbsp;instructing the sheriff of the parish where the goods are then located to seize the goods, and, after appropriate delay and advertisement, sell the goods at judicial sale. Louisiana has a non-standard UCC &sect;&nbsp;9-629, which provides for executory process foreclosure remedies with regard to security interests affecting non-possessory goods. The executory process foreclosure rules are more liberal than those applicable to Louisiana real estate mortgages. It is necessary for a secured lender to include contractual provisions in its UCC security agreement under which the debtor consents to the exercise of executory process foreclosure remedies following default, and also under which the debtor confesses judgment in favor of the secured lender for the full amount of the secured indebtedness. There is no requirement that a secured lender sell UCC-secured goods or other collateral at public or private sale, or at judicial sale as a result of an executory process foreclosure, with the benefit of appraisal, in order to preserve the lender's right to collect any resulting deficiency from the debtor. The Louisiana Deficiency Judgment Act (La. R.S. &sect;&sect;&nbsp;13:4106 et seq.) does not apply to the exercise of default remedies under the Louisiana UCC. However, if the sale is not a judicial one, the sale must be “commercially reasonable,” in order to pursue the deficiency judgment. La. R.S. &sect;&sect;&nbsp;10:9-626.

UCC REMEDIES

MANUFACTURED HOUSING TRANSACTIONS

Manufactured home loans to Louisiana consumers are subject to the RMLA (as discussed above), provided that the borrower undertakes to “immobilize” the manufactured home pursuant to Section 1149.4 of the Louisiana Manufactured Home Property Act (La. R.S. &sect;&sect;&nbsp;9:1149.1 et seq.), thereby converting the home from movable (personal) property into immovable (real) property.

MANUFACTURED HOMES THAT ARE IMMOBILIZED UNDER THE LOUISIANA MANUFACTURED HOME PROPERTY ACT

If the consumer borrower/purchaser does not elect not to immobilize a manufactured home, a consumer loan or a credit sale to finance the home's purchase is not subject to the RMLA, but it is instead treated in the same manner as a motor vehicle loan or credit sale subject to the Louisiana Motor Vehicle Sales Finance Act (La. R.S. &sect;&sect;&nbsp;6:969.1 et seq.) (the “LSFA”). The LSFA applies to both motor vehicle/manufactured home loans and dealer originated credit sales. The maximum interest rate under the LSFA depends upon whether the transaction is a direct loan by a bank or finance company, or a dealer originated credit sale. Interest on direct consumer loans to purchase a non-immobilized manufactured home is limited to the same 36%, 27%, 24%, and 21% maximum aggregate rate limitations that apply to consumer real estate loans under the RMLA and the LCCL. La. R.S. &sect;&nbsp;6:969.9. Interest on a dealer originated credit sale to purchase a new, year model manufactured home is limited to 18% per annum. Interest on a consumer credit sale to purchase a new, non-year model manufactured home, or a used manufactured home of up to 2 model years in age, is limited to 24% per annum. Interest on a consumer credit sale to purchase a used manufactured home that is 3 or 4 model years in age is limited to 27% per annum; and the maximum rate on a consumer credit sale to purchase a used manufactured home of more than 4 model years in age is limited to 33% per annum. La. R.S. &sect;&nbsp;6:969.10. Non-immobilized manufactured homes are treated in the same manner as titled motor vehicles subject to Louisiana UCC Article&nbsp;9 and the Louisiana Motor Vehicle Certificate of Title Act (La.&nbsp;R.S. &sect;&sect;&nbsp;32:701 et seq.). UCC filings with respect to non-immobilized manufactured homes must be made with the Louisiana Department of Public Safety and Corrections, Motor Vehicle Division. A manufactured home in Louisiana is never considered to be a “fixture” under the Louisiana UCC. Unless the borrower immobilizes a manufactured home by following the procedures set forth in La.&nbsp;R.S. &sect;&nbsp;9:1149.4, the manufactured home retains its legal status as movable (personal) property, notwithstanding the fact that the manufactured home may be located on and physically attached to a slab or other foundation. &nbsp;

Louisiana

Mortgage Law Summary

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Mortgage Law Summary for Louisiana

Louisiana

Mortgage Law Summary

Continue reading theMortgage Law Summary for Louisiana

Continue reading the
Mortgage Law Summary for Louisiana