Georgia 2012 Legislative Update. End of Session Update Issued April 13, 2012

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1 Georgia 2012 Legislative Update End of Session Update Issued April 13, 2012 The second session of the Georgia General Assembly ended Thursday, April 5, The bills that did not pass during the 2011 regular session were re-considered during the 2012 session. Below are final updates on the bills of importance to the default servicing community. Note that the bills that passed are still awaiting the Governor s signature as of the date of this update. Bills that did pass in 2012: SB 333 amends GA so as to require foreclosures notices to be provided to all debtors regardless of whether or not the property is a primary residence. This bill passed the House and Senate and is currently on the Governor s desk for signature. HB 110 allows Georgia municipalities to establish a vacant and foreclosed property registration within a statewide framework that would preempt local ordinances. Vacant property is defined as property that is (a) intended for habitation, has not been inhabited for 60 days and has no evidence of utility usage within the past 60 days or so or (b) partially constructed or incomplete without a building permit. Foreclosed property is defined as improved or unimproved property for which a land disturbance permit has been issued by a county or municipal corporation and is held pursuant to a judicial or nonjudicial foreclosure or a deed in lieu of foreclosure or in partial satisfaction of a debt or obligation to the creditor. Registrants can be required to provide the following information, but nothing more: (1) the property address and parcel number, (2) owner s name and contact information, (3) the local agent s name and contact information, (4) transfer date of the instrument conveying the real property to the owner, and (5) when it becomes available, the recording information, including the book and page of the instrument conveying the real property. If the registration information is included in the Deed Under Power or Deed In Lieu and the deed is recorded within 60 days of sale, the a separate registration and fee is not required. The owner may apply for removal once the property no

2 longer constitutes vacant or foreclosed real property. The registration fee shall not exceed$ and penalties may not exceed $1, This bill was passed in the House and the Senate in the 2012 session and is currently on the Governor s desk for signature. If signed by the Governor, the effective date is July 1, HB 237 amends the definition of mortgage lending process to include the execution of Deeds Under Power that are recorded pursuant to foreclosure laws and the execution of assignments that are required to be recorded prior to foreclosure sale. This bill was passed by the House and the Senate and is on the Governor s desk for final approval. SB365 creates a uniform acknowledgment and waiver of borrower s rights. If passed, the bill would make a mortgage with a power of sale voidable if a waiver of borrower s rights and attorney attestation is not completed for a residential real property mortgage. This bill sailed through the House and Senate in 2012 and is currently awaiting final approval by the Governor. SB 117 increases exemptions from levy and sale of property both inside and outside of bankruptcy. It is designed to reduce the risk of homeowners losing their homes during financial hardship by increasing the amount of certain exemptions. Specifically, it raises exemptions from the levy and sale of property that is a debtor s primary residence from $5, to $21, It also increases the amount exempted for bankruptcy purposes. This bill passed in both chambers and is currently on the Governor s desk for final approval. HB198 extends the sunset dates for real estate and personal property filing fees. SB136 provides for transfer of control of a condominium association in certain circumstances as well as provides a standard for legal standing of condominium associations to bring suit. This bill was passed by the House and Senate and is awaiting the Governor s signature.

3 HB 728 states that land restriction covenants shall not last longer than 20 years. This bill passed the House and Senate and is currently awaiting final approval by the Governor. Bills that did not pass in 2012: HB 1042 amends GA to require the Deed Under Power to be recorded within 45 days of the foreclosure sale as opposed to the current requirement of 90 days. The bill provides for a private right of action for the failure to comply with the 45 day recording requirement. Damages shall be presumed in the amount of $1, plus attorneys fees but shall not exceed $2, This bill did not make it out of the House judiciary committee. HB 781: Real property; any document securing payment of money shall be deemed a mortgage; HB 781 would add a new Code section, GA Code and , which lays out the definition for mortgages as well as the procedure for foreclosing on mortgaged properties. The new section would read as follows: All conveyances, obligations, bills of sale, and other instruments of writing executed on or after January 1, 2013, that convey or sell real property with the intention of securing the payment of money, whether such instrument is from the debtor to the creditor or from the debtor to a third person in trust for the creditor, shall be deemed to be mortgages and shall be subject to all provisions of law relating to mortgages. No such instrument executed on or after January 1, 2013, shall be foreclosed through any procedure other than those governed by the provisions governing the foreclosure of mortgages. Nothing in this Code section shall be construed so as to impair any contract entered into prior to January 1, In all suits for the foreclosure of mortgages executed on or after January 1, 2013, the court shall not enter a deficiency decree for any portion of any deficiency, if one exists. No suit to recover any such deficiency shall be maintained against the mortgagor or his or her heirs or assigns." This bill did not pass this legislative session.

4 HB 64 amends Georgia s law on attorney s fees upon notes or other indebtedness. A party required to pay an award of attorney s fees greater than $10, can challenge the reasonableness of the award by filing a petition with the court and submitting an affidavit. The court may hold a hearing and will award attorney s fees based upon the amount reasonable and necessary to assert the petitioner s rights. The House passed and adopted this bill on February 28, 2011; however, it never made it out of the Senate committee during the 2011 general session. It could have been re-examined in 2012 but never was. HB 204, named Protecting Georgia Homeowners Act of 2011, is targeted at foreclosure rescue scammers and is designed to provide homeowners with relief from unfair practices related to foreclosure. The bill focuses mainly on foreclosure fraud schemes and not lenders. Violators are subject to the penalties and remedies in the Fair Business Practices Act, and may be subject to monetary penalties not to exceed $30, per violation. This bill is targeted at foreclosure rescue scammers. This bill remained in the House Judiciary Committee in 2011 and 2012 and did not pass. HB 209 amends Georgia s foreclosure statute to include the street address of the property at the beginning of the foreclosure advertisement. It also requires each official county legal organ to publish a separate list of property addresses advertised for foreclosure with the corresponding reference number of the advertisement each week. This bill remained in the House Judiciary Committee in 2011 and 2012 and did not pass. HB 419 originally amended Georgia s current foreclosure law to require 90 days notice to the borrower before the sale can be held but that provision was removed by the House committee members later in the 2011 regular session. The new version of the bill allows the borrower to cure the default with good funds up to 5 days prior to the sale by paying the creditor the full amount owed on the loan, including any late fees. Good funds include wire transfers or money orders. The House passed this bill in March 2012 but the Senate did not any take further action on it during this session.

5 HB 445 gives additional rights to bona fide tenants of residential properties that have been foreclosed and changes provisions relating to judgments and writs of possession. It includes the requirement to return the security deposit to the tenant after lawful deductions are made and gives the tenant protections similar to those afforded in the federal Protecting Tenants At Foreclosure Act of Additional protections include the requirement of giving notice to the tenant that the foreclosure sale took place within 10 days after the sale and non-payment of rent during the sale month would not be grounds to terminate the lease. This bill remained in the House Judiciary Committee in 2011 and there was no further action in HB 447, the Foreclosure Rescue Fraud Prevention Act, provides consumer protection from fraudulent foreclosure rescue schemes. It requires licensing of individuals or businesses who act as foreclosure rescue consultants and the posting of a $500, bond. It gives the homeowner the right to bring an action for recovery of damages or equitable relief for a violation of act or on grounds that the agreement for services was breached or there was duress, fraud or unfair consumer practices. The court can award damages up to three times the actual amount of damages. This bill remained in the House Judiciary Committee in 2011 and there was no further action in HB 527 establishes penalties for foreclosures in violation of the Service Members Civil Relief Act, specifically requiring that the foreclosed property be returned to the borrower for any violation prior to the time of the resolution. For those foreclosures in violation of the SCRA after the law is enacted, the lender will be required to pay the service member the fair market value of the property at the time of the loan or at the time of the foreclosure, whichever is higher. This bill remained in the House Judiciary Committee in 2011 and there was no further action in HB 338, the Neighborhood Stabilization Act or NEST Act, attempts to overhaul the existing state foreclosure law. It appears that the language in the proposal was taken from another state s law as the references to a trustee and appointment of trustee do not apply in Georgia. There are also sections on the Foreclosure Fraud Civil Action Act, Deficiency Judgments, and the

6 Mortgage Modification Safe Harbor. For more information on these sections, select the link below. The proposal requires that notice of a loan transfer be provided to the mortgagor by the new creditor within 30 days. Amongst other items, the notice must include the agent authorized to act on behalf of the new creditor, and in addition, the assignment shall include a valid mailing address and legal description of the property sold. The current law requires that the assignment of deed to secure debt into the foreclosing entity be recorded prior to sale. However, this proposal would require that a full chain of assignments be recorded prior to sale so that the entity asserting that they are the holder of the security deed can directly trace their interest to the original mortgagee. If an intervening assignment cannot be recorded because an entity no longer exists, an affidavit may be filed. The Act also entitles the borrower or borrower s representative to a written payoff within 30 days of making a request and it must be free of charge. The written payoff must be under oath and from a corporate officer. The NEST Act states that right to cure letters cannot be sent and foreclosure proceedings cannot be commenced until the borrower is 120 days late on the mortgage payments. Prior to the initiation of foreclosure the borrower shall receive a right to cure notice and have a 45 day window to bring the loan current. The act requires a notice of intent to foreclose be sent to the borrower and tacked to the property. The notice shall include, amongst other standard items, the name and license number of the Georgia mortgage lender and originator, the amount required to reinstate the loan, contact information for government resources available to assist borrowers facing foreclosure, an explanation of the Georgia foreclosure process and a loss mitigation application and contact information. Other loan information, statements and affidavits must be included with the notice of intent to foreclose but there is no time frame designated for delivery of this notice. Additional notice of foreclosure proceedings must sent no later than 30 days prior to foreclosure which is in line with the current law. However, the proposal amends the information required in the notice. This bill remained in the House Judiciary Committee in 2011 and there was no further action in SB 262: Counties/Municipal Corporations; owner of property against which a notice of code violation has been sent. The owner of real property against which a notice of code violation has been sent who fails to correct such violation within 48 days shall be subject to a fine of $ for every day thereafter during which such violation remains uncorrected. If the fines are not

7 paid, a lien will be placed on the property and the property can be foreclosed in the same manner as a tax lien. The Act creates a post-foreclosure registry which requires the submission of the telephone number and address of the new owner. This bill remained in the Senate Judiciary Committee in 2012 and did not pass. HB 245 requires notice to a surety or cosigner on a loan obligation at the same time that the principal is notified that he or she is in default. This bill did not gain much traction and ultimately was not passed during the 2011 or 2012 legislative sessions. SB 123 has similar proposals to those contained in HB 338, the Neighborhood Stabilization Act, described above. Similarities include the 30 days notice upon loan transfer, the recording of all intervening assignments prior to the foreclosure and new entitlements for payoffs. In addition, the proposal changes the 30 day notice of foreclosure sale to 60 days notice and requires that the notice be tacked to the property. Additional items such as contact information for foreclosure alternatives, date of default and amount to reinstate the loan, explanation of Georgia foreclosure process and the title report shall be included with the notice of foreclosure. The act creates a civil cause of action and provides remedies when there is foreclosure fraud as defined in the proposal. This bill remained in Senate Banking Committee in 2011 and 2012 and ultimately did not pass. HB 1047 amends GA Code by adding a new section, , to require a judgment of the fair market value of a property prior to foreclosure of that property and to further require that the opening bid on that property be no less than fair market value. The new section would read as follows: When the holder of a deed to secure debt or a mortgage on real property seeks to obtain a money judgment on the same prior to foreclosure and sale under power, the court shall require evidence to show the fair market value of the property to be used by the court in consideration of the issuance of such judgment. The court shall render an opinion as to the fair market value of the property, which may, in the court's discretion, be based solely upon a sworn affidavit from the holder as to the fair market value of the property if no evidence is submitted by the debtor demonstrating a different fair market value. The fair market value of the property as established by the court in accordance with this Code section shall be the opening bid in a sale under power. This bill remained in the House Judiciary Committee during the 2012 session and ultimately did not pass.

8 SB 479 would require the purchaser of a condominium in foreclosure to take title subject to a lien in favor of the condominium or homeowner s association. It would also require the purchaser to take ownership of no more than half of the obligation of the homeowner s association. This bill remained in the Special Judiciary Committee of the Senate in 2012 and there was not much action on it at all. Ultimately, it did not pass. SB 448 is the Small Business Borrower Protection Act and would severely limit how much the creditor can recover against any guarantor on any debt obligation. The bill would only allow the creditor to recover the actual amount paid for the debt, plus interest. If passed, this bill would have weakened the credit market in Georgia. The bill was ultimately killed during the 2012 legislative session due to its unpopularity.