Alabama and Michigan Legislative Update

Alabama and Michigan Legislative Update

The Alabama legislature recently enacted the Alabama Residential Mortgage Satisfaction Act (the “Act”) which is effective March 1, 2013.  The Michigan legislature recently extended loss mitigation provisions which were expiring.

 

ALABAMA SENATE BILL 347

 

The Act applies only to mortgages securing residential real property located in Alabama that is used primarily for personal, family, or household purposes and is improved by one to four dwelling units.  The Act does not apply to mortgages on commercial or other types of property.  The Act also does not apply to a security interest exclusively in one or more fixtures.

 

 

“Entitled person” means the person or persons liable for payment or performance of the obligation secured by the real property described in the security instrument.

 

 

“Equity line security instrument” means a security instrument securing, in whole or in part, indebtedness created under a line of credit, a revolving or open-end credit agreement, or a credit agreement that provides for future advances.  The credit agreement may be referred to in the Act as an “equity line” or an “equity line of credit.”

 

 

“Residential real property” or “real property” means property located in Alabama that is used primarily for personal, family, or household purposes and is improved by one to four dwelling units.

 

 

“Secured creditor” (referred to as “lender”) means the person that currently holds or is the beneficiary of a security interest or that is authorized both to receive payments on behalf of a person that currently holds a security interest and to record a satisfaction of the security instrument upon receiving full performance of the secured obligation.  The term does not include a trustee under a security instrument.

 

 

“Security instrument” means a mortgage or other agreement that creates or provides for an interest in residential real property to secure payment or performance of an obligation.

 

 

“Security interest” means an interest in residential real property created by a security instrument.  A security interest exclusively in one or more fixtures does not constitute an interest in residential real property.

 

 

A person liable for payment or performance of the obligation secured by the real property described in a security instrument who makes proper notice will be entitled to receive a payoff statement.

 

 

Proper notice must contain all of the following:

  • The entitled person’s name;
  • If given by a person other than an entitled person, the name of the person giving the notification and a statement, if required by the secured party evidence, that the person is an authorized agent of the entitled person;
  • The address to which the lender must send the statement;
  • The account number assigned by the lender or other sufficient information to enable the lender to identify the secured obligation and the real property encumbered by the security interest; and
  • If the secured obligation is an equity line, a statement that the entitled person requests the lender to close the equity line upon receipt of full payment of the equity line on the payoff date specified in the notification and authorizes the lender, at the lender’s sole discretion and upon notification to the entitled person or to the entitled person’s authorized agent, to suspend the extension of any additional amounts under the equity line for a period of time prior to the payoff date as designated by the lender.  Any payoff statement on an equity line may qualify the payoff amount as being subject to change.

 

Within 14 days after the receipt of a notification, the lender must issue a payoff statement.  A lender may take reasonable measures to verify the identity of any person acting on behalf of the entitled person and to obtain the entitled person’s authorization to release information to that person before the 14-day time period begins.  If a secured obligation cannot be prepaid, a statement of that fact is sufficient.  Otherwise, a payoff statement must contain, in substance and with no particular phrasing required, the following:

  • The date on which it was prepared and the payoff amount as of that date, including the amount of unpaid principal, interest and fees, or other charges included within the payoff amount;
  • The information reasonably necessary to calculate the payoff amount as of the requested payoff date, including the per diem interest amount.  This requirement does not apply to equity line security instruments; and
  • The payment cutoff time, if any, the address or place where payment must be made, and any limitation as to the authorized method of payment.

 

A lender may qualify a payoff amount or state that it is subject to change before the payoff date and provide in the payoff statement information sufficient to permit the entitled person or the person’s authorized agent to request an updated payoff amount and to obtain that updated payoff amount during the lender’s normal business hours on the stated payoff date or the immediately preceding business day.

 

 

A lender is not required to send a payoff statement by means other than first class mail, facsimile, or electronic mail.

 

 

If a lender determines that the payoff statement it provided was erroneous, the lender may send a corrected payoff statement.  If the entitled person or the person’s authorized agent receives and has a reasonable opportunity to act upon a corrected payoff statement before making payment, the corrected statement supersedes an earlier statement.  This does not affect the right of a lender to recover any sum that it did not include in a payoff amount from any person liable for payment of the secured obligation, including, without limitation, the entitled person who requested the payoff statement.

 

 

The above provisions do not preclude or apply to other methods of obtaining payoff information such as telephone calls, electronically, or other methods.

 

 

The following provisions do not apply if the lender receives full payment or performance of the secured obligation before March 1, 2013:

 

 

A lender must submit for recording a satisfaction of a security instrument within 30 days after the lender receives full payment and performance of the secured obligation.  The lender has no obligation to make advances, incur obligations, or otherwise give value under any agreement.  Equity line security instruments are fully paid and performed only if, in addition to full payment and performance, the equity line previously has been closed according to the request of the entitled person or the entitled person’s authorized agent or otherwise closed as provided by law and all secured obligations have been paid in full.

 

 

Any notification demanding satisfaction of the security instrument must be sent to the lender’s address by a method that also provides proof of receipt by the lender.

 

 

A lender that is required to submit a satisfaction of a security instrument for recording and does not do so within 30 days after the lender receives full payment and performance of the secured obligation is liable to the borrowers for $500 if following the expiration of the 30 days the borrowers make a written request to the lender to record a satisfaction and the lender fails to do so within 21 days after receipt of the written request.  The written request must be signed by the borrowers and by all other persons who have a right to require the mortgage to extend value or be signed by an authorized agent of these persons.

 

 

A lender that is required to submit a satisfaction of a security instrument for recording and does not do so by the end of 21 days is not liable to the borrower other than for the $500 penalty and any actual economic damages directly caused by the failure to comply with the above provisions.

 

 

A lender is not liable under the Act if it:

  • Establishes a reasonable procedure to achieve compliance with its obligations under the Act;
  • Complies with the procedure in good faith; or
  • Fails to comply with its obligations either because of circumstances beyond its reasonable control or as a result of a bona fide error, regardless of the maintenance of reasonable procedures of compliance.

 

Only a title insurance company or an attorney licensed in Alabama acting as the agent of and for a title insurance company pursuant to a certificate of authority and within the scope of his or her agency agreement with a title insurance company may serve as a satisfaction agent.  The Act does not require a title insurance company to agree to serve as a satisfaction agent or any attorney or other agent to act on behalf of a title insurance company.

 

 

If a lender has not submitted for recording a satisfaction of a security instrument within 30 days after full and complete payment of all indebtedness secured by the security instrument, a satisfaction agent acting for and with authority from the borrowers may give the lender a notification that the satisfaction agent intends to submit for recording an affidavit of satisfaction of the security instrument.  The notification must include all of the following:

  • The identity and mailing address of the satisfaction agent;
  • Identification of the security instrument for which a recorded satisfaction is sought, including the names of the original parties to, and the recording data for, the security instrument;
  • A statement that the satisfaction agent has determined all of the following:
    • That the real property described in the security instrument is residential real property or, at the time the security interest was made, was residential real property;
    • That the person to which the notification is being given is the lender; and
    • That the lender has received full payment and performance of the secured obligation;
  • A statement that a satisfaction of the security instrument does not appear of record in the chain of title; and
  • A statement that the satisfaction agent, acting with the authorization of the borrowers of the real property described in the security instrument, intends to sign and submit for recording an affidavit of satisfaction of the security instrument unless, within 30 days after receipt of the notification by the lender, any of the following occurs:
    • The lender submits a satisfaction of the security instrument for recording;
    • The satisfaction agent receives from the lender a notification stating that the secured obligation remains unsatisfied; and
    • The satisfaction agent receives from the lender a notification stating that the lender has assigned the security instrument or otherwise does not claim an interest in the security instrument.  In this event, the satisfaction agent will use all reasonable efforts to determine the name and address of, and notify the lender then owning the securing instrument.

 

A notification to the lender must be sent by a method that provides proof of receipt by the lender for giving a notification for the purpose of requesting a payoff statement or, if the satisfaction agent cannot ascertain that address, to the lender’s address for notification for any other purpose.

 

 

A satisfaction agent may sign and submit for recording an affidavit of satisfaction of a security instrument if either of the following occurs:

  • There does not appear of record a satisfaction of a security instrument within 30 days after the receipt by the lender of the notification; or
  • The lender authorizes the satisfaction agent to do so.

 

A satisfaction agent may not sign and submit for recording an affidavit of satisfaction of a security instrument if it has received a notification stating that the secured obligation remains unsatisfied or information that the security instrument has been assigned.

 

 

If a satisfaction agent receives information that the security instrument has been assigned, the satisfaction agent may not submit for recording an affidavit of satisfaction of the security instrument without giving a notification of intent to submit for recording an affidavit of satisfaction to the assignee.

 

 

An affidavit of satisfaction of a security instrument must do all of the following:

  • Identify the original parties to the security instrument, the lender, and the recording data for the security instrument;
  • State the basis upon which the person signing the affidavit is a satisfaction agent including, without limitation, that the person signing the affidavit is authorized to sign on behalf of, and to bind, the insurance company acting as satisfaction agent;
  • State that the person signing the affidavit has determined that the real property described in the security instrument is residential real property or was residential real property at the time the security instrument was made;
  • State that the person signing the affidavit determined that the lender has received full payment or performance of the secured obligation and, if the security instrument is an equity line security instrument, that the equity line has been closed;
  • State that the person signing the affidavit, acting with the authority of the owner of the real property described in the security instrument, gave notification to the lender of its intention to sign and submit for recording an affidavit of satisfaction;
  • Describe the method by which the person signing the affidavit gave notification;
  • State either of the following:
    • That more than 30 days have elapsed since the receipt of notification by the secured party, no satisfaction has been recorded, and the satisfaction agent has not received a notification that the secured obligation remains unsatisfied or received information that the secured obligation has been assigned; or
    • That the lender authorized the person signing the affidavit to sign and record an affidavit of satisfaction; and
  • Be sworn or affirmed, signed, and acknowledged as required by law for a conveyance of an interest in real property.

 

Upon recording, an affidavit complying with the requirements of the Act constitutes a termination of the security interest described in the affidavit.  The recording of an affidavit of satisfaction of a security instrument does not extinguish, offset, or otherwise affect any responsibility or liability of a person for payment or performance of the debt or other obligation secured by the security instrument.

 

 

A satisfaction agent or any other person who executes an affidavit of satisfaction of a security instrument erroneously or as a result of negligence or non-compliance with the Act is liable to the lender for any actual economic damages caused by the recording of the satisfaction.  This does not apply to the liability of a satisfaction agent who executes an affidavit of satisfaction of a security instrument erroneously as a result of wantonness, recklessness, or deliberate misconduct or to the liability of a person other than a satisfaction agent who erroneously executes an affidavit of satisfaction.

 

 

Michigan Senate Bill 1172

 

 

Our December 30, 2011 Compliance Memorandum discussed Michigan House Bill 4543, effective December 28, 2011, which added loss mitigation provisions to Michigan’s foreclosure laws.  The Michigan legislature recently extended those provisions until June 30, 2013 (previously December 31, 2012).