HB 218

Under existing law, secured creditors are only required to submit for recording the satisfaction of any residential mortgages

Non-residential mortgages, including commercial mortgages, are excluded from the satisfaction reporting requirements of the Alabama Residential Mortgage Satisfaction Act and a satisfaction is only recorded upon a written request of a mortgagor or a creditor of the mortgagor

This bill would expand that act requiring recordation of satisfaction to include non-residential mortgages, and would rename that act the "Alabama Mortgage Satisfaction Act." This bill would also make conforming changes in the Code

To expand the Alabama Residential Mortgage Satisfaction Act to include non-residential mortgages and to rename that act accordingly; and to amend Sections 35-10-26 and 35-10-30 to make conforming changes.

Section 1

Sections 35-10-90, 35-10-91, 35-10-92, 35-10-94, 35-10-96, 35-10-26, and 35-10-30 of the Code of Alabama 1975 are amended to read as follows:

§35-10-90.

(a) This article shall be known as the Alabama Residential Mortgage Satisfaction Act. This article applies only to mortgages securing residential real property located in this state which is used primarily for personal, family, or household purposes and is improved by one to four dwelling units. Without limitation, this article does not apply to mortgages on commercial or other types of property. This article also does not apply to a security interest exclusively in one or more fixtures as defined in Title 7, Article 9A.

(b) For purposes of this article, the following terms shall have the following meanings:

(1) ENTITLED PERSON. The person or persons liable for payment or performance of the obligation secured by the real property described in a security instrument.

(2)(1) EQUITY LINE SECURITY INSTRUMENT. 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 this article as an "equity line" or an "equity line of credit."

(2) MORTGAGOR. The person, persons, or entity liable for payment or performance of the obliation secured by the real property described in a security instrument.

(3) RESIDENTIAL REAL PROPERTY or REAL PROPERTY. Real Any real property located in this state. "Real property" which includes both residential and non-residential property.is used primarily for personal, family, or household purposes and is improved by one to four dwelling units.

(4) SECURED CREDITOR. At any particular time, 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.

(5) SECURITY INSTRUMENT. A mortgage or other agreement that creates or provides for an interest in residential real property to secure payment or performance of an obligation.

(6) SECURITY INTEREST. An interest in residential real property created by a security instrument. For purposes of this article, a security interest exclusively in one or more fixtures, as defined in Title 7, Article 9A, does not constitute an interest in residential real property.

(7) SUBMIT FOR RECORDING. To deliver, with required fees and taxes, a document, sufficient to be recorded, to the judge of probate of the county in which the property is located. For purposes of this article, without limitation, mailing, delivering, or sending by overnight or other delivery service a satisfaction of mortgage or other document to be submitted for recording to the address of the office for recording satisfactions of mortgages or other documents, as applicable, is sufficient to constitute submission for recording.

(8) TITLE INSURANCE COMPANY. An organization authorized to conduct the business of insuring titles to real property in this state and licensed by the Department of Insurance as defined in subdivision (9) of Section 27-25-3.

§35-10-91.

(a) A person liable for payment or performance of the obligation secured by the real property described in a security instrument mortgagor who makes proper notice pursuant to this section shall be entitled to receive a payoff statement.

(b) Proper notice must contain all of the following:

(1) The entitled person's mortgagor's name.

(2) If given by a person other than an entitled person a mortgagor, 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 mortgagor.

(3) The address to which the secured creditor must send the statement.

(4) The account number assigned by the secured creditor or other sufficient information to enable the creditor to identify the secured obligation and the real property encumbered by the security interest.

(5) If the secured obligation is an equity line, a statement that the entitled person mortgagor requests the secured creditor 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 secured creditor, at the secured creditor's sole discretion and upon notification to the entitled person mortgagor or to the entitled person’s mortgagor'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 secured creditor. Any payoff statement on an equity line may qualify the payoff amount as being subject to change.

(c) Within 14 days after the receipt of a notification that complies with subsection (b), the secured creditor shall issue a payoff statement. A secured creditor may take reasonable measures to verify the identity of any person acting on behalf of the entitled person mortgagor 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:

(1) 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.

(2) The information reasonably necessary to calculate the payoff amount as of the requested payoff date, including the per diem interest amount or any prepayment penalty which may apply. This subdivision does not apply to equity line security instruments.

(3) 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.

(d) A secured creditor 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 mortgagor or the person's mortgagor's authorized agent to request an updated payoff amount and to obtain that updated payoff amount during the secured creditor's normal business hours on the stated payoff date or the immediately preceding business day.

(e) A secured creditor is not required to send a payoff statement by means other than first class mail, facsimile, or electronic mail.

(f) If a secured creditor determines that the payoff statement it provided was erroneous, the creditor may send a corrected payoff statement. If the entitled person mortgagor or the person's mortgagor'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 article does not affect the right of a secured creditor to recover any sum that it did not include in a payoff amount from any person or entity liable for payment of the secured obligation, including, without limitation, the entitled person mortgagor who requested the payoff statement.

(g) This section does not preclude, nor does it apply to, other methods of obtaining payoff information such as telephone calls, electronically, or other methods.

§35-10-92.

(a) A secured creditor shall submit for recording a satisfaction of a security instrument within 30 days after the creditor receives full payment and performance of the secured obligation, and the secured creditor 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 pursuant to the request of the entitled person mortgagor or the entitled person’s mortgagor's authorized agent or otherwise closed as provided by law and all secured obligations have been paid in full.

(b) Notwithstanding anything to the contrary in this article, any notification demanding satisfaction of the security instrument must be sent to the secured creditor’s address by a method that also provides proof of receipt by the secured creditor.

(c) A secured creditor that is required to submit a satisfaction of a security instrument for recording and does not do so by the end of the period specified in subsection (a) is liable to the mortgagors for five hundred dollars ($500) if following the expiration of the time period in subsection (a) the mortgagors make a written request to the secured creditor to record a satisfaction and the secured creditor fails to do so within 21 days after receipt of the written request. The written request must be signed by the mortgagors and by all other persons who have a right to require the mortgage to extend value or signed by an authorized agent of these persons.

(d) A secured creditor that is required to submit a satisfaction of a security instrument for recording and does not do so by the end of the period specified in subsection (c) is not liable to the mortgagors other than for the penalty set forth in subsection (c) and any actual economic damages directly caused by the failure to comply with this section.

(e) A secured creditor is not liable under this article if it does the following:

(1) Establishes a reasonable procedure to achieve compliance with its obligations under this article.

(2) Complies with that procedure in good faith as defined in Section 7-9A-102(43).

(3) Fails to comply with its obligations either because of circumstances beyond its reasonable control or as a result of a bona fide error, notwithstanding maintenance of reasonable procedures of compliance.

(f) (1) Subsections (a), (b), (c), and (d) do not apply if the secured creditor receives full payment or performance of the secured obligation relating to residential propertybefore March 1, 2013.

(2) Subsections (a), (b), (c), and (d) do not apply if the secured creditor receives full payment or performance of the secured obligation relating to nonr-residential property before the effective date of the act adding this amendatory language."

§35-10-94.

(a) If a secured creditor has not submitted for recording a satisfaction of a security instrument within the time set forth in Section 35-10-92 after full and complete payment of all indebtedness secured by the security instrument, a satisfaction agent acting for and with authority from the mortgagors may give the secured creditor 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:

(1) The identity and mailing address of the satisfaction agent.

(2) 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.

(3) A statement that the satisfaction agent has determined all of the following:

a. That Whether the real property described in the security instrument is was, at the time the security interest was made, residential real property or, at the time the security interest was made, was residential non-residential real property.

b. That the person to which the notification is being given is the secured creditor.

c. That the secured creditor has received full payment and performance of the secured obligation.

(4) A statement that a satisfaction of the security instrument does not appear of record in the chain of title.

(5) A statement that the satisfaction agent, acting with the authorization of the mortgagors 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 secured creditor, any of the following occurs:

a. The secured creditor submits a satisfaction of the security instrument for recording.

b. The satisfaction agent receives from the secured creditor a notification stating that the secured obligation remains unsatisfied.

c. The satisfaction agent receives from the secured creditor a notification stating that the secured creditor 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 secured creditor then owning the securing instrument.

(b) A notification to the secured creditor under subsection (a) must be sent by a method that provides proof of receipt by the secured creditor for giving a notification for the purpose of requesting a payoff statement or, if the satisfaction agent cannot ascertain that address, to the secured creditor's address for notification for any other purpose.

§35-10-96.

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

(1) Identify the original parties to the security instrument, the secured creditor, and the recording data for the security instrument.

(2) 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.

(3) State that the person signing the affidavit has determined that whether the real property described in the security instrument is residential real property or was, at the time the security instrument was made, residential real property or non-residential real property at the time the security instrument was made.

(4) State that the person signing the affidavit determined that the secured creditor 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.

(5) 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 secured creditor of its intention to sign and submit for recording an affidavit of satisfaction.

(6) Describe the method by which the person signing the affidavit gave notification in compliance with this article.

(7) State either of the following:

a. 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.

b. That the secured creditor authorized the person signing the affidavit to sign and record an affidavit of satisfaction.

(8) Be sworn or affirmed, signed, and acknowledged as required by law for a conveyance of an interest in real property.

§35-10-26.

The payment or satisfaction of the real property mortgage debt divests the title passing by the mortgage.

Payment or satisfaction of the real property mortgage debt" shall not occur until there is no outstanding indebtedness or other obligation secured by the mortgage, and no commitment or agreement by the mortgagee to make advances, incur obligations or otherwise give value (collectively referred to as "extend value"), under any agreement, including, without limitation, agreements providing for future advances, open end, revolving or other lines of credit, or letters of credit. Except as otherwise specifically provided to the contrary in the Alabama Residential Mortgage Satisfaction Act, upon the written request to satisfy a mortgage signed by the mortgagors and by all other persons who have a right to require the mortgagee to extend value or signed by other authorized representatives on behalf of the mortgagors and such other persons, which notice shall actually be served upon the mortgagee, and provided there is no outstanding obligation secured by the mortgage at that time, the mortgagee shall file a properly executed and notarized satisfaction of the mortgage or otherwise cause the mortgage to be satisfied in accordance with other applicable provisions of law. From and after such written request for mortgage satisfaction, neither the mortgagors nor any other person who signed such request, or on whose behalf such request was signed, shall have the right to request or demand that the mortgagee extend value under the mortgage or other agreements and the mortgagee shall be released from all obligations and commitments to extend value thereunder."

§35-10-30.

(a) If, for 30 days after such request, the mortgagee secured creditor or assignee or transferee, trustee or cestui que trust, fails to make any entry required by this article he or she forfeits to the party making the request two hundred dollars ($200) unless there is pending, or there is instituted, an action within that time, in which the fact of partial payment or satisfaction is or may be contested. In construing this article, the this right of action given herein shall be considered as a personal right, and shall not be lost or waived by a sale of the property covered by the mortgage or deed of trust before a demand was made for the satisfaction to be entered upon the record.

(b) All actions for the recovery of the penalties mentioned provided in this article shall be brought in the county where such the mortgage or other instrument is recorded.

(c) This section does not apply to satisfactions of residential mortgages which are governed by the Alabama Residential Mortgage Satisfaction Act."

Section 2

Section 35-10-27 of the Code of Alabama 1975 is repealed.

Section 3

This act shall become effective on the first day of the third month following its passage and approval by the Governor, or its otherwise becoming law.