Wednesday, September 7, 2011

Can A Lender Assign A Mortgage After The Advertisement Is Published?

             Georgia is a non-judicial foreclosure state that requires strict performance with the notice requirements for a courthouse steps foreclosure sale.  Can a lender after it starts the advertising process assign the debt to another lender, record the assignment and proceed to the stairs to foreclose?  Well, in Georgia, we really don't know. 

            In this rarified world of "who owns the debt on the date of sale," the assignments of secured debt prior to foreclosure (and even immediately prior to sale) are not uncommon. 

            An assignment of a Security Deed after the advertisement runs in Georgia seems to set up three (3) potential problems with a foreclosure sale.

            1.         The post in time assignment and recording of same creates inaccurate information concerning the defined lender in the advertisement;

            2.         The post in time assignment and recording of same creates a potential argument by the borrower to later assert that the sale by different lender "chilled the bidding," as a matter of fact; and,

            3.         The post in time assignment and recording of same sets up a factual challenge to the foreclosure under the new OCGA § 44-14-162.2 "contact the lender" requirements.

            With regard to challenges 1 and 2 stated above, the Georgia Court of Appeals recently reversed the grant of a summary judgment to a lender who assigned its security deed and debt AFTER the advertisement on the foreclosure had run.  In returning the case to the trial court, the Georgia Court of Appeals focused on the possible factual errors associated with the assignment and recording of the transfer of the security deed AFTER the advertisement had run in the legal organ. 

            While it is a heavily fact-based analysis, the Georgia Court of Appeals wrote: 

           The dispositive question is whether the secured creditor exercised the power of sale 'fairly and in good faith.'  [Citations omitted.]  The May 19 and May 30 advertisements contained inaccurate information regarding the foreclosing party.  But other evidence shows that interested persons had at least constructive notice of the proper party prior to sale.  So the record does not demonstrate that, as a matter of law, the bidding was chilled or the sale was unfair; and the trial court erred in setting aside the foreclosure sale on summary judgment. 

            We cannot agree with the secured creditor, however, that it was entitled to summary judgment regarding the validity of the foreclosure sale.  As noted above, the secured creditor did not file the assignment document until four days before the sale.  Moreover, it has pointed to no evidence conclusively showing that, as a matter of law, the misinformation in the advertisement did not impact the bidding or that the sale was otherwise conducted fairly and in good faith.  Simply put, questions or facts remain as to the sale's validity.  Accordingly, we reversed [the summary judgment granted to lender in the lower court].  "Amirfazli v. Vatacs Group, Inc., et al., Georgia Court of Appeals, Case Nos. A11A1165; A11A1166; MC051; and, MC052.  (July 21, 2011). 

            The Scribd document of Amirfazli may be found at:

            With regard to the third (3) issue listed above, it may be that a post assignment and recordation of an assignment runs afoul of the publishing requirements associated with OCGA § 44-14-162.2.  Generally, the new advertising notices contain statements including 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 mortgage with the debtor … " OCGA § 44-14-162.2(a).  If and in the event a Security Deed and Note is assigned after the advertisement runs, it is almost a certainty (but it is possible that the same servicer will service both lenders) that the listing of the individual or entity given legal authority to negotiate the debt has changed.  Thus, the stated person to modify the loan would now be different from the assigned and recorded entity post end time to the advertisement.  This change in the advertising data may set up a fatal error associated with the non-judicial foreclosure.

            While most borrowers simply have no resources to challenge these issues (and we long ago quit representing borrowers on any type of contingency arrangement) if any lenders are taken to task on post end-time assignments, borrowers may have new factual arguments under the Amirfazli, supra, case and may be able to assert that the information required under OCGA § 44-14-162.2(a), is factually wrong. 

            Additionally, if a lender attempts to proceed to a deficiency judgment claim (albeit it would be rare in an assignment case immediately prior to sale), a borrower would have a good defense to a post OCGA § 44-14-161 confirmation action.  This new defense to confirmation would exist because the information listed and published with the foreclosure would be at variance with the strict requirements of the publication of foreclosure. 

            The above interesting thoughts and ideas arose from a conversation with the ever creative and “out of the box” thinking attorney Rick Alembik, Decatur, Georgia.

Hugh Wood
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
twitter: USALawyer_
Phone: 404-633-4100
Fax: 404-633-0068

1 comment:

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