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Birmingham Bar Association Bulletin - Winter 2013

chases the property by crediting the outstanding debt by a certain amount. Th e property is conveyed by execution of a foreclosure deed, whether it is purchased by the lender or a third party. If the lender was the highest bidder, the lender will take title to the real property, subject to any senior liens, as well as the liabilities and obligations that correspond to the private ownership of real property—current occupants included. (iii) Obtaining possession of foreclosed property After a foreclosure sale in which the lender has taken title to the property, the lender usually attempts to sell the property to recover some or all of the loss incurred by the borrower’s failure to repay curred the loan. However, owning the property is not synonymous with physical possession of the property. If the property is occupied, either by the borrower, mortgagor, lessee, or some unknown person or entity, lenders are then faced with the task of obtaining physical possession. Although there are various laws granting certain rights to certain types of occupants of foreclosed properties, the recent decisions reported by the Alabama Supreme Court address the remedy of ejectment. 5 Th e three recent decisions from the Alabama Supreme Court clarify several aspects of the above-described aspects of Alabama foreclosure and ejectment law. Th e remainder of this article will summarize each decision and explain its signifi - cance for secured lenders. B. Ex parte GMAC Mortgage, LLC In 2011, the Alabama Court of Civil Appeals handed down its decision in Sturdivant v. BAC Home Loans Servicing, LP LP. In Sturdivant, the court ruled that a mortgage assignment occurring after a loan had been accelerated due to an event Real Estate Law of default and after the foreclosure notice had started publication was not eff ective to transfer to the assignee the right to foreclose because the party foreclosing on the mortgage needed the power of sale in order to “initiate the foreclosure process.”6 In Ex parte GMAC Mortgage, LLC, the Alabama Supreme Court overruled Sturdivant. 7 Th e Court held that the power of sale is exercised upon the execution and delivery of the foreclosure deed. So long as the foreclosing entity has the power of sale at the moment it executes the foreclosure deed, the sale is valid (assuming all other requirements are also met). Th e Court reached this conclusion after reviewing Alabama statutes and cases referring to the “exercise” or “execution” of the power of sale. Th e authorities, the Court said, do not refer to the foreclosure “process” but a defi nite point in time—i.e., the moment the borrower’s rights are extinguished upon the execution of the foreclosure deed.8 Up until that time, the borrower can avoid the foreclosure by paying the debt and related charges. Th us, the eleventh-hour assignment did not aff ect the validity of the foreclosure sale. As the Court explained, “At the time GMAC Mortgage signed and delivered the foreclosure deed, it was in fact the holder of the mortgage. It had at that point the full power to exercise the power of sale so as to ‘foreclose’ the mortgagor’s rights in the land and convey those rights to itself or to another.”9 Th e case of GMAC Mortgage puts to rest the argument that the foreclosure process must be re-initiated if a mortgage is assigned after publication of the foreclosure notice has begun. Th erefore, a party may start publishing the foreclosure notices prior to obtaining the necessary assignments entitling that party the authority to exercise the power of sale. a lender can agree to undertake additional obligations prior to exercising the power of sale. Th e minimum requirements under Alabama law dictate that the lender publish a notice of mortgage foreclosure sale for three consecutive weeks in a newspaper of general circulation in the county where the real property is situated. Th is notice must describe the property and state the time, place, and terms of the sale. Finally, the sale must occur in front of the main entrance of the county courthouse between 11:00 a.m. and 4:00 p.m. If these requirements are met, a foreclosure sale “vests the legal title of the lands sold under the power of sale to the purchaser at the sale.”4 It is common that the lender is the only (and thus the highest) bidder at a foreclosure sale and therefore, pur Birmingham Bar Bulletin/ Winter 2013 11


Birmingham Bar Association Bulletin - Winter 2013
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