DEEDS TO SECURE DEBT (SECURITY DEEDS)
14.1 Security Deed Recorded Prior to Deed by Which Ownership Acquired
The validity of a security deed is not impaired by the fact that it is filed for record prior to the filing for record of the instrument by which ownership is acquired, except to the extent that rights of third parties may have intervened. The recordation of an affidavit pursuant to O.C.G.A. Section 44-2-20 giving notice of a security deed recorded prior to the date of the deed into the grantor will place the security deed in the chain of title of the grantor as to parties acquiring interests from the grantor subsequent to the recordation of the affidavit.
Comment: If A has conveyed to B by warranty deed, and B thereafter has executed a security deed to A or a third party, the validity of the security deed is not affected by its being filed for record prior to the filing for record of the conveyance. Further, after recordation of the conveyance, the security deed is in the line of search unless it was filed for record prior to the indicated date of the conveyance. Of course, rights may have intervened between recordation of the security deed and recordation of the conveyance.
14.2 Deed from Owner to Holder of Security Deed
(a) Marketability is not impaired by the fact that title is derived through a conveyance from an owner to the holder of a security deed. In the absence of a statement in such conveyance that it is in lieu of foreclosure, the examiner should consider any other facts available from the record and should make further inquiry if indicated, to determine whether the conveyance was in fact in lieu of foreclosure, or whether it was given merely as further security for the debt. In addition, if the record shows or the examiner has knowledge of the act that the mortgagor has or claims grounds for setting aside the conveyance or that a petition for bankruptcy has been filed by or against the owner prior to or within twelve months following the conveyance, further inquiry is necessary, whether title is held by the mortgagee or by a grantee from him.
(b) Marketability is not impaired by an undischarged security deed where an unqualified conveyance has been made by a person who was both record holder of the security deed and record holder of equitable title. Inquiry, or discharge of the security deed is unnecessary unless the record affirmatively discloses an intention that the security deed continue in effect.
Comment: A conveys to B, the holder of a security deed, with a recital that no merger was intended; and B thereafter conveys to C and the deed is silent as to the security deed. No cancellation of the security deed is required although the better practice would have been the inclusion of recital in the deed from B to C that a merger was intended at that point in time.
14.3 Satisfaction of Assignment of Rents
Failure to release an assignment of rents does not impair marketability, if from the record it can be determined or inferred with reasonable certainty that the assignment was given as additional security for an obligation secured by a security deed which has been discharged of record. Otherwise, the assignment of rents must be satisfied in the same manner as a security deed.
14.4 Releases Corrective or Re-recorded Security Deed
Where a security deed is followed by another which can be determined from the record to have been given to correct or modify the former, or to be a rerecording of the former, or to secure the same obligation, if the cancellation of one of the security deeds contains recitals which make it clear that no debt remains between the grantor and the grantee, failure to cancel the other security deed does not impair marketability. Marketability is not impaired by a failure to discharge a modification agreement where the original security deed so modified has been canceled and satisfied of record. However, it would be better practice to have both instruments canceled of record.
14.5 Reference to Unrecorded Security Deed
A reference in an instrument in the chain of title to a security deed which cannot reasonably be identified with any security deed in the chain of title impairs marketability and necessitates corrective action.
14.6 Reversion of Property Conveyed to Secure Debt
Title to real property conveyed to secure debt reverts to the Grantor: (a) Where the maturity of the debt is stated in the record of such conveyance, and the indebtedness has not been renewed, seven years from such maturity; or (b) Where no maturity is stated, and the conveyance does not contain any affirmative statement as to the establishment of a perpetual or indefinite security interest (as specified in subparagraph (c), infra), seven years from the date of the conveyance provided the affidavit specified in subparagraph (f), infra, has not been recorded; or (c) Where no maturity is stated but the conveyance contains an affirmative statement that the parties intend to establish a perpetual or indefinite security interest in the real property conveyed to secure a debt or debts, twenty years from the date of the conveyance, provided that the affidavit specified in subparagraph (f), infra, has not been recorded; or (d) If no maturity is stated nor is there a date shown for the conveyance, at the expiration of seven years from the date the conveyance is recorded, provided the affidavit specified in subparagraph (f), infra, has not been recorded; or (e) Where there is a dated written renewal of the indebtedness signed by the original grantor or grantor’s heirs, personal representative, or successors in title to the real estate conveyed, either seven or twenty years from the date of the renewal according to the appropriate reversion period set out above; or (f) If grantee or grantee’s personal representatives, heirs, successors, or assigns, or any of them if more than one, or an officer of a corporation having an interest files of record an affidavit in accordance with the provisions of O.C.G.A. Section 44-14-80 (c) specifying the maturity date of the indebtedness secured, and if the debt has been renewed or extended, the terms thereof, either seven or twenty years from the maturity date specified in the affidavit according to the appropriate reversion period set out above. Comment: O.C.G.A. Section 44-14-80 provides very specific rules for the application of the reversion. Specific reference should be made to this section before passing title based on the reverter. Deeds executed prior to the passage of this original section (March 27, 1941) are not affected by the section. See Smith v. Merchants & Farmers Bank of Milledgeville, 226 Ga. 715, 177 S.E.2d 240 (1970); Drake v.. Barrs, 225 Ga. 597, 170 S.E.2d 684 (1969); Todd v. Morgan, 215 Ga. 220, 109 S.E.2d 803 (1959). Prior to the 1994 amendment this code Section established a 20 year reverter following maturity of the debt or recording or delivery if no maturity was stated. This Code Section, as amended, should not be relied upon as to security deeds executed prior to the effective date, April 19, 1994, of the 1994 amendment.
14.7 Satisfaction of Deeds to Secure Debt
Deeds to secure debt may be satisfied of record in any one of the following four ways:
(1) By written order of the record holder of the deed to secure debt, entered on the face of the deed, directing that the deed be canceled and that the Clerk enter it satisfied in the appropriate deed records.
(2) By quitclaim deed containing a reference to the deed to secure debt and reciting that the quitclaim deed is given for the purpose of either: (a) satisfying of record the deed to secure debt, the debt secured thereby having been paid in full, or (b) releasing the described property from the lien of the deed to secure debt. The Grantee in such quitclaim deed should be one of the following:
(A) The current holder of record title, or
(B) The person into whom title is to be conveyed, or
(C) The original Grantor in the deed to secure debt.
(3) In instances in which the original deed to secure debt has been lost, stolen, or otherwise mislaid, by document in substantially the following form, executed by the owner of the security interest and who swears in such document, which document shall be recorded:
_______________ County, Georgia
The indebtedness referred to in that certain deed to secure debt from _____ to _____ , dated _____ , and of record in Deed Book _____ , Page _____ , in the _____ office of the clerk of the Superior Court of _____ County, Georgia, having been paid in full, and the undersigned being the present record owner of such secured interest by virtue of being the original grantee or the heir, assign, transferee, or devisee of the original grantee, the clerk of such Superior Court is authorized and directed to cancel that deed of record as provided in Code Section 44-14-4 of the O.C.G.A. for other mortgage cancellations.
In witness whereof, the undersigned has set his or her hand and seal, this _____ day of _____ , 20_____.
Signed, sealed, and delivered Signature on the date above shown
Notary Public (Seal)
My commission expires:
Comment: The above three methods of cancellation are based upon O.C.G.A. Section 44-14-67. The absence of a recital identifying the security deed in the quitclaim deed suggested in (b) above does not render the quitclaim deed ineffective provided that there is no limitation on the grant. However, a recital specifying the security deed to be canceled is preferable practice in that it gives rise to the possibility that the Clerk will in fact satisfy the security deed by virtue of O.C.G.A. Section 44-14-67(b)(2) or at least cross reference the quitclaim deed on the record of the security deed.
(4) In instances where a grantee or holder of record of a deed to secure debt fails to transmit to the court a legally sufficient satisfaction or cancellation, the clerk is authorized and directed to cancel the deed to secure debt upon the recording of an affidavit by an attorney who has caused the secured indebtedness to be paid in full or by an officer of a regulated or chartered financial institution whose deposits are federally insured if that financial institution has paid the secured indebtedness in full. The affidavit shall include a recital of actions taken to comply with O.C.G.A. Section 44-14-3(c.1). The affidavit shall also include as attachments the following items:
(1) A written verification that was given at the time of payment by the grantee or holder of record of the amount necessary to pay off the loan secured by the deed to secure debt; and
(2) Any one of the following:
(A) Copies of the front and back of a canceled check to the grantee or holder of record paying off such loan, or
(B) Confirmation of a wire transfer to the grantee or holder of record paying off such loan, or
(C) A bank receipt showing payment to the grantee or holder of record of such loan.
Comment: The fourth method of cancellation is based upon O.C.G.A. Section 44-143(c.1), effective July 1, 1999. This method of cancellation is only effective in the event that the grantee or holder of record of the paid deed to secure debt fails to transmit a proper cancellation to the clerk of the superior court within 60 days after written notice has been mailed to the grantee or holder of record. The notice to be mailed to the grantee or holder of record shall identify the indebtedness and include a recital or explanation of O.C.G.A. Section 44-14-3(c.1). (This section was revised effective August 18, 2005, primarily to add Paragraph 4 and related Comment.)
14.8 Failure to Pay Intangible Recording Tax
Although failure to pay intangible recording tax pursuant to O.C.G.A. Section 48-660 et seq. constitutes a bar to collection of the indebtedness secured by a mortgage, deed to secure debt or other form of security instrument, an instrument otherwise in a form sufficient for recording and actually recorded by the Clerk of Superior Court in the appropriate county is effective as legal notice of the interest of the secured party, even if the intangibles tax has not been paid. [O.C.G.A. Section 48-6-62(a)(2)].
14.9 Waiver of Borrower’s Rights
It is recommended that at closing the borrower execute a Waiver of Borrower’s Rights. this will allow the loans to be sold in any market, However, the failure of such waiver to be attached to the security deed as recorded shall not invalidate the security deed nor prevent the exercise of an otherwise proper power of sale. Comment: Prudent closing procedure since 1973, following the decision of Law v. United States Dept. of Agriculture, 366 F. Supp. 1233 (N.D. Ga. 1973), has included the use of the Borrower’s Waiver in conjunction with the execution of the deed to secure debt containing the power of sale by non-judicial foreclosure. It is settled that state action is not involved in the exercise of the private power of sale by a private lender and therefore there can be no violation of the due process requirements of the fourteenth Amendment [Global Industries, Inc. v. Harris, 376 F. Supp. 1379 (N.D. Ga. 1974); Ruff v. Lee, 230 Ga. 426, 197 S.E.2d 376 (1973)], and likewise it is settled that federal action is not involved in the exercise of the power of sale by a private lender in a mortgage financed under a federal loan program and therefore there can be no violation of the due process requirements of the Fifth Amendment [Roberts v. Cameron Brown, 556 F.2d 356 (5th Cir. 1977)]. However, prudence dictates that the execution of such a waiver at closing is one more indication that the borrower understands that he/she will not be sued on the note prior to the exercise of the private non-judicial power of sale.