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Recent News
January 9, 2009
The firm wishes to congratulate Susan Howick, who has recently been chosen as a 2009 Georgia Super Lawyer in the field of Business Litigation. Susan has previously been honored
as a Georgia Super Lawyer on two (2) occasions. In addition, Susan Howick has recently been honored by Georgia Trend Magazine as one of the 2008 Georgia Legal Elite in the
fields of Bankruptcy and Creditor's Rights.
Full versions of the following articles are available upon request and in accordance with firm policy.
Representing Creditors Issues and Strategies
By M. Todd Westfall
Events of default occur, and the savvy lender knows they should not prompt paralysis on the part of the loan officer. There is also nothing to be gained by hand wringing or living in denial. The fact that a default has occurred cannot be changed and should not be ignored if the best is to be made of a bad situation.
“Knee jerk” reactions may not be appropriate either. Firing off a foreclosure notice without any thought may make a bad situation much worse. Letting the world know what you think of this borrower may only give you a seat at the defense table as a defendant.
Between the two extremes, the possibility of a workout exists. A workout requires thoughtful action. As described in Thomas Wolfe's A Man in Full, it may even require an “artistry.” At a minimum, a workout presents a period of opportunity for the lender. Because of leverage given by the impending foreclosure, the lender has a chance to correct mistakes, take additional collateral, amend documents and, in the best cases, rehabilitate a project, make a profit and salvage a customer relationship.
Real Property Foreclosure - A Summary of Nonjudicial Foreclosure in Georgia
Georgia statutes recognize three types of instruments by which real estate may secure the payment of debt or performance of some other obligation: 1) mortgage; 2) deed to secure debt; and 3) deed of trust.
While the deed of trust is an available security instrument, it has never been widely used in this state and will not be discussed further in these materials.
A mortgage is defined as a conveyance of a lien to secure an obligation, which terminates upon payment of a specified debt. The three traditional elements are: 1) a debt, 2) a conveyance, and 3) a defeasance clause.
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 it provides that the conveyance to the grantee shall become null and void upon payment, it is a mortgage.
For many reasons lenders prefer to use the security deed rather than the mortgage. Mortgaged property is subject to levy by judgment holders and lienors, and the lien may be overridden by homestead and year’s support. This is not true of property subject to a security deed because a security deed conveys legal title to the grantee.
While the security deed is always preferred and used in almost all residential and commercial real estate loan transactions, occasionally a mortgage will be used by someone unfamiliar with Georgia law and practice. Fortunately, except for questions of priorities and limitation of actions, the laws governing security deeds and mortgages are very similar. If the mortgage contains an adequate power of sale, it can be foreclosed through nonjudicial exercise of the power of sale in the same manner as the security deed.
Because the security deed is so prevalent in Georgia, the balance of these materials will focus solely upon security deeds. Further, through the remainder of these materials the terms “mortgagor” and “mortgagee” shall mean, respectively, the grantor and grantee in a security deed and “mortgaged property” shall mean real property encumbered by a security deed.
Bankruptcy and its Effect on Real Estate Foreclosure
By Louis G. McBryan and Virginia B. Bogue
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) was signed into law by President Bush April 20, 2005. Some provisions became effective immediately, but most became effective October 17, 2005. BAPCPA amends the Bankruptcy Code. Most of the amendments affect consumer cases but there are provisions that affect business cases. There are considerable changes to the automatic stay, which affects all cases. This paper’s focus is real property; thus, there are many provisions of BAPCPA that will not be discussed. We encourage you to become familiar with all provisions.
Nationwide, total consumer and corporate bankruptcies increased forty percent in 2007 over 2006. In Georgia, there were 48,104 bankruptcies filed in 2007 as compared to 50,462 in 2006. This is a three to five percent decrease for the period ending September 30, 2007, the last quarter for which figures are available. However, since that time, with the downturn in the economy, the number of filings has likely increased and the fourth quarter 2007 figures will bear this out. (See Appendix A) In 2007, there were 197 business Chapters 11 filed in the Northern District, 12 in the Middle District, and 24 in the Southern District. As of March 12, 2008, 59 business Chapter 11s had been filed in the Northern District, a large percentage of which are related to the construction industry. Five business Chapter 11s have been filed in the Middle District and seven have been filed in the Southern District. These numbers show an increase in the rate of business filings this year over last year.
According to the U.S. Commerce Department, construction of new homes fell 14 percent in December 2007, to a seasonally adjustable annual rate of 1.01 million, the slowest building pace in more than sixteen years. For all of 2007, housing starts fell 25 percent to 1.35 million, the lowest total since 1993, and building permits fell 25 percent in 2007 to 1.3 million, the lowest since 1995. Sale of new homes in 2007 dropped a record 26 percent to a seasonally adjusted annual rate of 647,000, the lowest level in twelve years according to the U.S. National Census. RealtyTrac reported 201,950 foreclosure filings, default notices, auction sale notices, bank repossessions in its November 2007 U.S. Foreclosure Market Report, up nearly 68% from November 2006. The National foreclosure rate for the month represented one foreclosure filing for every 617 households.
Clayton County has the highest foreclosure rate in the state with one foreclosure filing for every 134 households. This rate is 2.6 times the state average and four times the national average. Henry County registered the second highest foreclosure rate with one foreclosure filing for every 148 household, 2.4 times the state average and 3.6 times the national average. The third highest rate was reported in Rockdale County with one foreclosure filing for every 156 households, which is 2.3 times the state average and the 3.4 times the national average. Douglas County came in fourth with the rate of one foreclosure filing for every 163 households, followed by Walton County, with one foreclosure filing for every 196 households.
The total foreclosure filings in Georgia accounted for five percent of the 223,001 foreclosure filing reported nationwide in January. Georgia had 99,578 foreclosure filings in 2007, which was an increase of 31.07 percent from 2006 and 118.43% increase from 2005.
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