Source: http://hughwood.blogspot.com/2009/03/
Timestamp: 2019-05-27 03:41:09
Document Index: 184135682

Matched Legal Cases: ['§ 44', '§ 2', '§ 44', '§ 44', '§ 44', '§ 44', '§ 44', '§ 44', '§ 44', '§ 44', '§ 44', '§44', '§ 44', '§ 44', '§ 44', '§ 44', '§ 44', '§ 4414', '§\n44']

The US Treasury released its Summary and Stated Guidelines for The Home Affordable Refinance program. They are displayed below:
Higher limits allowed for owner-occupied properties with 2-4 units.
HERE ARE THE GUIDELIINES AS OF MARCH 4, 2009
Affordable Modification Program Guidelines
Trial loan modifications consistent with these Guidelines may be offered to homeowners beginning on this date, March 4, 2009, and may be considered for acceptance into the Home Affordable Modification Program upon completion of the trial period and other conditions.
These Guidelines, however, do not constitute a contract offer binding on the Department of the
Program Elements Described in the Guidelines
Treasury will partner with financial institutions to reduce homeowners'
monthly mortgage payments. The lender will have to first reduce
payments on mortgages to no greater than 38% Front-End Debt-to-
Income (DTI) ratio. Treasury will match further reductions in monthly
payments dollar-for-dollar with the lender/investor, down to a 31% Front-
End DTI ratio for the borrower.
for Success Fees:
Servicers will receive an up-front Servicer Incentive Payment of $1,000
for each eligible modification meeting guidelines established under this
initiative. Servicers will also receive Pay for Success payments -as long
as the borrower stays in the program - of up to $1,000 each year for up to
Borrower Pay-for-
Success Payments:
Borrowers are eligible to receive a Pay-for-Performance Success
Payment that goes straight towards reducing the principal balance on the
mortgage loan as long as the borrower is current on his or her monthly
payments. Borrowers can receive up to $1,000 of Pay-for-Performance
Success Payments each year for up to five years.
One-time bonus incentive payments of $1,500 to lender/investors and
$500 to servicers will be provided for modifications made while a
borrower is still current on mortgage payments. The servicer will be
required to maintain records and documentation evidencing that the Trial
Period payment arrangements were agreed to while the borrower was less
than 30 days delinquent. The servicer must comply with any express
pooling and servicing contractual restrictions for modifying current loans.
No payments under the program to the lender/investor, servicer, or
borrower will be made unless and until the servicer has entered into the
program agreements with Treasury's financial agent. Servicers must
enter into the program agreements with Treasury's financial agent no later
than December 31, 2009.
The program guidelines reflect usual and customary industry standards
for mortgage loan modifications contained in typical servicing
agreements, including pooling and servicing agreements (PSAs)
governing private label securitizations. Participating servicers are
required to consider all eligible loans under the program guidelines unless
prohibited by the rules of the applicable PSA and/or other investor
servicing agreements. Participating servicers are required to use
reasonable efforts to remove any prohibitions and obtain waivers or
approvals from all necessary parties.
The mortgage to be modified must have been originated on or before
New borrowers will be accepted until December 31, 2012. Program
payments will be made for up to five years after the date of entry into a
Home Affordable Modification. Monitoring will continue through the
Any foreclosure action will be temporarily suspended during the trial
may be resumed.
Loans can only be modified under the Home Affordable Modification
Subordinate liens are not included in the Front-End DTI calculation, but
they are included in the Back-End DTI calculation.
Servicers should follow any existing express contractual restrictions with
respect to solicitation of borrowers for modifications.
Front-End DTI is the ratio of PITIA to Monthly Gross Income. PITIA is
defined as principal, interest, taxes, insurance (including homeowners
insurance and hazard and flood insurance) and homeowners association
and/or condominium fees. Mortgage insurance premiums are excluded
from the PITIA calculation.
The Front-End DTI Target is 31%. The Standard Waterfall step that
results in a Front-End DTI closest to 31%, without going below 31%, will
satisfy the Front-End DTI Target. There is no restriction on reducing
Front-End DTI below 31%, but any portion of the reduction below 31%
will not be covered by the Payment Reduction Cost Share.
The servicer may use, at its discretion, either one of the government
sponsored enterprises (GSEs) automated valuation model (AVM) -
provided that the AVM renders a reliable confidence score - or a broker
price opinion (BPO).
As an alternative, the servicer may rely on the AVM it uses internally
provided that (i) the servicer is subject to supervision by a Federal
regulatory agency, (ii) the servicer's primary Federal regulatory agency
has reviewed the model and/or its validation and (iii) the AVM renders a
reliable confidence score.
If the GSE or servicer AVM is unable to render a value with a reliable
confidence score, the servicer must obtain an assessment of the property
value utilizing a property valuation method acceptable to the servicer's
Federal regulatory agency, e.g. in accordance with the Interagency
Appraisal and Evaluation Guidelines (as though such guidelines apply to
loan modifications), or a BPO.
In all cases, the property valuation may not be more than 60 days old.
The borrower's income will be verified by requiring a signed Form 4506-
T (Request for Transcript of Tax Return) and obtaining the most recent
tax return on file for each borrower on the note. For wage earners, the
two most recent pay stubs for each wage earner on the note will also be
required. For self-employed borrowers or for non-wage income, the
borrower's income will be verified by obtaining other third party
documents that provide reasonably reliable evidence of income.
Borrowers must also represent and warrant that they do not have
sufficient liquid assets to make their monthly mortgage payments.
The borrower's Monthly Gross Income is the amount before any payroll
deductions includes wages and salaries, overtime pay, commissions, fees,
tips, bonuses, housing allowances, other compensation for personal
services, Social Security payment, including Social Security received by
adults on behalf of minors or by minors intended for their own support,
annuities, insurance polices, retirement funds, pensions, disability or
death benefits, unemployment benefits, rental income and other income.
Monthly net income can be used for preliminary screening and
qualification. If used, the servicer will need to multiply net income by
1.25 to get to an estimate of Monthly Gross Income.
The Back-End DTI is the ratio of the borrower's total monthly debt
payments (such as Front-End PITIA, any mortgage insurance premiums,
payments on all installment debts, monthly payments on all junior liens,
alimony, car lease payments, aggregate negative net rental income from
all investment properties owned, and monthly mortgage payments for
second homes) to the borrower's Monthly Gross Income. The servicer
must validate monthly installment, revolving debt and secondary
mortgage debt by pulling a credit report for each borrower or a joint
report for a married couple. The servicer must also consider information
obtained from the borrower orally or in writing concerning incremental
Borrowers who otherwise qualify for a modification under this program,
but who would have a post-modification Back-End DTI greater than or
equal to 55%, will be provided with a letter stating that they are required
to work with a HUD-approved counselor and the modification will not
take effect until they provide a signed statement indicating that they will
Imminent Default:
Every potentially eligible borrower who calls or writes in to their servicer
in reference to a modification must be screened for hardship. This screen
must ascertain whether the borrower has had a change in circumstances
that causes financial hardship, or is facing a recent or imminent increase
in the payment that is likely to create a financial hardship (payment
shock). If the borrower reports a material change in circumstances, the
servicer must ask about current income and assets, and current expenses
as well as the specific circumstances relating to the claimed financial
hardship. Each of these elements shall be verified through
If the servicer determines that a non-defaulted borrower facing a financial
hardship is in Imminent Default and will be unable to make his or her
mortgage payment in the immediate future, the servicer must apply the
NPV Test.
A standard NPV Test will be required on each loan that is in Imminent
Default or is at least 60 days delinquent under the MBA delinquency
calculation. This NPV Test will compare the net present value (NPV) of
modification scenario is greater, the NPV result is deemed positive.
The NPV Test applies to the Standard Waterfall only and does not require
If the NPV Test generates a positive result when applying the Standard
Waterfall, the servicer is required to offer a Home Affordable
Modification to the borrower. If the NPV Test generates a negative
result, modification is optional, unless prohibited under contract. The
monthly payment reduction incentive is available for any Home
Affordable Modification, whether or not NPV positive, that meets the
eligibility requirements and is performed according to the waterfall
If the NPV Test result is negative and a Home Affordable Modification is
not pursued, the lender/investor must seek other foreclosure prevention
alternatives, including alternative modification programs, deed-in-lieu
and short sale programs.
Loan Modification and Standard Waterfall
Servicers will follow the Standard Waterfall described below to reduce
monthly payments to the 31% Front-End DTI Target defined above. The
initiative will reimburse lenders/investors for one half of the cost of
reducing monthly payments from a level consistent with a 38% Front-
End DTI Ratio (or less, if the unmodified DTI is less than 38%) down to
a level consistent with a 31% Front-End DTI Ratio. This Payment
Reduction Cost Share can last for up to five years.
Servicers will be required to consider a borrower for refinancing into the
Hope for Homeowners program when feasible. Servicer incentive
payments will be paid for Hope for Homeowner refinances.
If the underwriting process for a Hope for Homeowners refinance would
delay eligible borrowers from receiving a modification offer, servicers
will use the Standard Waterfall to begin the Home Affordability
Modification and work to complete the Hope for Homeowners refinance
during the Trial Modification Period.
Consideration for a Hope for Homeowners refinance should not delay
eligible borrowers from receiving a modification offer and beginning the
Trial Modification Period.
Step 1b: Validate total first lien debt and monthly payments (PITIA). For
purposes of making a provisional modification offer during the trial
modification period, the borrower's unverified income and debt payments
can be used. Provisional information and modification terms will be
verified in a timely manner.
Step 2: Capitalize arrearage. Servicers may capitalize accrued interest,
past due real estate taxes and insurance premiums, delinquency charges
paid to third parties in the ordinary course of servicing and not retained
by the servicer, any required escrow advances already paid by the
servicer and any required escrow advances by the servicer that are
currently due and will be paid by the servicer during the Trial Period.
Late fees are not capitalized.
Step 3: Target a Front-End DTI of 31%. The lender/investor shall follow
steps 4, 5, and 6 to reduce the borrower's payment to the level
corresponding to the Front-End DTI Target.
Step 4: Reduce the interest rate to reach the Front-End DTI Target
(subject to a floor of 2%). The note rate should be reduced in increments
of 0.125 %, and should bring the monthly payment as close as possible to
the Front-End DTI Target without going below 31%. If the resulting
modified interest rate is at or above the Interest Rate Cap, this modified
interest rate will be the new note rate for the remaining loan term. If the
resulting modified interest rate is below the Interest Rate Cap, this
modified interest rate will be in effect for the first five years, followed by
annual increases of 1% (100 basis points) per year or such lesser amount
as may be needed until the interest rate reaches the Interest Rate Cap, at
which time it will be fixed for the remaining loan term.
Step 5: If the Front-End DTI Target has not been reached, extend the
term of the loan up to 40 years. If term extension is not permitted extend
amortization. The 40-year term begins at the start of the modification
(after the borrower successfully completes the Trial Period). Note that
the servicer should only extend to a term that is necessary to reach the
Front-End DTI Target; there is no requirement to extend to a 40-year
Step 6: If the Front-End DTI Target has not been reached, forbear
principal. If there is a principal forbearance amount, a balloon payment
of that forbearance amount is due on the maturity date, upon sale of the
property, or upon payoff of the interest bearing balance. If the
modification does not pass the NPV Test and the servicer chooses to
modify the loan, the modified balance must be no lower than the current
Reduction Option:
There is no requirement to use principal reduction under the Home
Affordable Modification program; however, servicers may forgive
principal to achieve the Front-End DTI Target.
Principal forgiveness can be used on a standalone basis or before any step
in the Standard Waterfall process. If principal forgiveness is used,
subsequent steps in the Standard Waterfall may not be skipped. If
principal is forgiven and the rate is not reduced, the rate will be frozen at
its existing level and treated as a modified rate for the purposes of the
In the event of principal forgiveness, the Payment Reduction Cost Share
continues to be based on the change in the borrower's monthly payment
from 38% to 31% Front-End DTI ratio and is limited to five years.
The modified interest rate must remain in place for five years, after which
time the interest rate will be gradually increased 1% (100 basis points)
per year or such lesser amount as may be needed until it reaches the
The Interest Rate Cap for the modified loan is the lesser of (i) the fully
indexed and fully amortizing original contractual rate or (ii) the Freddie
Mac Primary Mortgage Market Survey rate for 30-year fixed rate
conforming mortgage loans, rounded to the nearest 0.125%, as of the date
that the modification document is prepared.
If the modified rate exceeds the Freddie Mac Primary Mortgage Market
Survey rate in effect on the date the modification document is prepared,
the modified rate will be the new note rate for the remaining loan term.
No interest will accrue on the forbearance amount.
If the option to forebear principal is selected, the servicer shall forbear on
collecting the deferred portion of the Capitalized Balance until the
earliest of (i) the maturity of the modified loan, (ii) a sale of the property,
or (iii) a pay-off or refinancing of the loan.
A loan will be considered to have redefaulted when the borrower reaches
a 90-day delinquency status under the MBA delinquency calculation.
Redefaulting Loans will be terminated from the program, and no further
payments of any kind will be made to the lender/investor, servicer, or
borrower. Redefaulting Loans should be considered for other loss
mitigation programs prior to being referred to foreclosure.
Successful completion of the trial modification period and entry into
program agreements between the servicer and Treasury's financial agent
are prerequisites for any payments to the lender/investor, servicer, or
Modification is effective the first calendar month following the
successful completion of the Trial Period. Successful completion means
that the borrower is current (under the MBA delinquency calculation) at
Borrowers in foreclosure restart states will be considered to have failed
the Trial Period if they are not current at the time the foreclosure sale is
borrower will be made during the Trial Period. No payments under the
program to the lender/investor, servicer, or borrower will be made if the
Trial Period is not completed successfully. No payments under the
program to the lender/investor, servicer, or borrower will be made unless
and until the servicer has entered into the program agreements with
Treasury's financial agent.
The Trial Period will last 90 days (three payments at modified terms) or
longer if necessary to comply with investor contractual obligations. The
borrower must be current at the end of the Trial Period to obtain a Home
Servicers are required to escrow for modified borrowers' real estate taxes
and mortgage-related insurance payments immediately if they have the
capability of processing these payments or are already using a third-party
vendor for this purpose. Servicers who do not have this capacity must
implement an escrow process within six months of the program
For borrowers with a Back-End DTI of 55% or higher, the servicer must
inform the borrower of the availability and advantages of counseling and
provide a list of local HUD-approved counselors. The servicer must
provide the borrower with a letter stating that counseling is a requirement
of the modification terms. This letter may be required by counselors in
order to begin counseling. The modification will not take effect until the
borrower represents in writing that he or she will obtain counseling.
If the modified loan was assumable prior to modification, a Home
Affordable Modification cancels this feature.
Reimbursable by
Modification fees and charges to the servicer will be reimbursable by the
investor. These include notary fees, property valuation and other
required fees. Servicer reimbursement by the investor will take place
within the normal process between the servicer and the investor.
Unpaid late fees will be waived for the borrower. These include late fees
prior to the start of the Trial Period and accrued during the period.
The servicer will cover the cost of the credit report.
Compensation is provided to the servicer that performs the loss
mitigation or modification activities. Upon modification following
successful completion of the Trial Period, and contingent on signing the
program servicer agreement, the servicer will receive an incentive fee of
$1,000 for each eligible modification meeting Home Affordable
Modification guidelines.
Servicers will also receive Pay for Success fees - payable 12 months
from the effective date of the Trial Period as long as the borrower
continues in the program - of up to $1,000 each year for three years.
Servicers will no longer receive Pay for Success incentive payments for
Redefaulting Loans or for loans that have paid off subject to certain de
minimis constraints (discussed below).
For loans modified while still current under the MBA delinquency
calculation, the servicer will receive a Current Borrower One-Time
Incentive of $500 following successful completion of the Trial Period.
Lenders that service their own loans are eligible for these incentives.
Throughout this document the term "servicer" means the party that is
responsible for performing the modification activities.
or (ii) the borrower's current monthly payment. This compensation will
from the program. In any given month, the borrower's mortgage
half the reduction in the borrower's annualized monthly payment.
Servicers' modifications under this program must comply with the Equal
the servicer to allow the servicer to determine the borrower's eligibility
Servicers will be required to collect and transmit borrower and property
To reduce the borrower's overall indebtedness and improve loan
modification programs run by those agencies. FHA's Hope for
must modify the loan (absent fraud, etc.) However, an "NPV positive"
The program allows the servicer to choose the Discount Rate to use in the
Federal Reserve's H.15 bulletin.
Property value will be determined in accordance with the Guidelines.
The remaining parameters will come from data sets held or produced by
apply Cure Rates and Redefault Rates estimated based on the servicer's
Posted by Hugh Wood at 12:55 PM 2 comments: Links to this post
Labels: “Hugh Wood” Federal Home Affordable Refinance Program
Mechanic's liens are important and subcontractors and materialmen must get paid for legitimate work they do on real property. However, there are other "gray area" mechanic's liens. Those are the ones your client calls you about and says, "We just found a lien on our property for the installation of pool cleaning equipment, but we don't own a pool" [1] The "gray" liens will not survive under the new law.
For years, perhaps a century or more, property owners, homeowners and commercial owners, have been held hostage by undefined, vague, unknown and "willy nilly" mechanics liens. The new "Notice of Contest," Form and built-in lien expiration dates will prevent this harm. Property owners will now be able to "join the issue" within sixty (60) days or the lien will expire.
I. Omnibus Changes Associated with the New Law
From reading the new law [2], my guess is we will see changes in three (3) areas: 1) the volume of lien suits will rise, due to the "notice of contest" provisions, 2) the cost to bond around mechanic's liens will rise significantly, and 3) plenty of lien filers will die on the vine under the new two (2) day Notice Provision.
Lien laws are a derogation of common law and must be strictly construed. That means, if you fail to follow the letter of the statute you get - no lien. Many claimants and practitioners had difficulty with the old law; the new law has some new and interesting pitfalls of its own.
Mechanics and Materialmen have a special lien on the real property until they are paid. [3] Generally, the lien runs in favor of: contractors, subcontractors, materialmen furnishing material to subcontractors, laborers to subcontractors, architects, foresters, land surveyors, professional engineers, [ * * * ] and suppliers of rental tools. Id.
The old mechanic's lien law provided that the lien must be filed within 3 months of the last work or last supply of materials to the jobsite and that suit was to be filed, if at all, within 12 months from the last work. [4] The new lien law, thankfully, tracks this date from the date of the filing of the lien at the courthouse, not the vague date the subcontractor last worked (supplier last delivered to) on the property.
II. Technical Changes Associated with the New Law
The new Mechanic's Lien law generally allows the creation of the lien in the same format as the old law.
The main changes are: If the owner (homeowner, commercial property owner) bonds around or bonds off the lien, the new statute requires that the lienholder be notified. Notice was not required under the old statue. The dates are more completely defined. Three months to file has been changed to "90" days to file. Under the new law, the lienholder has only two (2) days to forward the notice of lien by certified mail or overnight courier to the owner. The old law stated, notice had to be given, but no date was specified.
Under the old law, a lienholder had one year to file suit from the last work or delivery of material. Under the new law, the lienholder has 365 days from the filing the lien in the courthouse. The filing of the Notice of the Lawsuit has been extended to 30 days from 14 days. There are also substantial changes to the Interim Waiver of and Release Upon Payment. [5] The new law also mandates that notice be sent to the owner of the property and to the contractor, if a notice of commencement has been filed by the contractor. The new law clarifies a defect in the old law. The mechanic's lien must now state when it expires or state the last date by which suit must be filed.
Property Owners get a new tool, the "Notice of Contest." Now an owner, homeowner, or commercial property owner, may immediately challenge the filing of the lien by forwarding a "Notice of Contest," to the individual or entity that filed the lien. The Notice of Contest is no mere impotent filing. It "joins the issue," so to speak. The Lienholder's time to sue drops by 10 months. The lienholder must sue within 60 days or the lien expires.
III. Areas of Impact
While these are this author's impressions only, my guess is we will see the volume of lien suits rise. The reason for the increase in lien suits will be associated with the Notice of Contest. If the mechanic's lienholder must sue or lose it, many more suits will be commenced to preserve the lien.
It will be interesting to see if one of the old tried and true litigation letters, the "tolling agreement," migrates to this new area of lien law. If the property owner and lien holder are still negotiating on the 59th day, it may be more cost effective to enter into a tolling agreement, than proceed with suit. The other option is to file, and then extend the time to answer.
I expect we will see bonding prices rise. Presently the bond companies (which are not legion), have factored into their rates the low number of suits that are filed a year after the work. Now with the new 60 day acceleration rule and the mandatory notification to the property owner, the bonding company is going to be immediately in the subcontractor’s gunsites. Would a client be more likely to sue a bonding company than the homeowner? Absolutely. If subcontractor proves its lien by suit, the bonding company is sitting on the pot of gold. With the property owner, the lienholder still faces the nightmare of colleting out of the property owner or foreclosing on the property. And the lien is generally subordinate to a junior to a first security deed bank.
Bonding companies will become the new hunted bounty under this new law - and, correspondingly, they should raise the bonding premium to reflect the new risk.
New motion practice will arise over whether the notice was mailed within two (2) days. While it seems black and white, I assure you this provision will not be clear after about the 3rd Georgia Court of Appeals opinion is handed down on this issue.
If the subcontractor files late, "too bad, he should have hired a lawyer." If the lawyer files late, it's a different story. Lawyers best get use to this new killer provision or be prepared to call their E&O carrier. Two days (2) is one of the shortest statutes known to man. [And, I thought the time a tenant had to answer a dispossessory was short. This make the "shorter than 11 days," in federal court look like an eternity. F.R.C.P. 6(a)(1)] Think about it. If you (a lawyer) file on a Thursday afternoon and get distracted over a long weekend, the lien is probably dead by the time you get it in the mail. Go explain to your client that you flushed his $92,000 mechanic's lien down the toilet because the lien filing is still in your briefcase. [6]
Overall, the changes in the Mechanic's Lien Law should be a welcome change of defined dates and defined notices. The old law was vague and undefined and probably caused many subcontractors to miss the one year filing deadline. The new notice provisions, and "notice of contest," will cause more suits to be filed. Lawsuits against bonding companies will increase, bonding premiums will increase and the two (2) day Notice Provision will generate a number of "Lien or No-Lien" lawsuits.
Donovan Donaly: "Excellent. Well, let's get right down to it, then, shall we? We'll take a couple of vacuum hoses. We probably need a new filter round about now. Maybe... Wait a minute, darling. Do we actually have a swimming pool?" Intolerable Cruelty (2003)
OCGA § 44-14-361.1. [Effective 3/31/2009] How Liens Declared And Created; Record; Commencement Of Action; Notice; Priorities; Parties; Limitation On Aggregate Amount Of Liens.
(2) The filing for record of his or her claim of lien within 90 days after the completion of the work, the furnishing of the architectural services, or the furnishing or performing of such surveying or engineering services or within 90 days after the material or machinery is furnished in the office of the clerk of the superior court of the county where the property is located. The lien shall include a statement regarding its expiration pursuant to Code Section 44-14-367 and a notice to the owner of the property on which a claim of lien is filed that such owner has the right to contest the lien; the absence of such statement or notice shall invalidate the lien. The claim shall be in substance as follows:
'A.B., a mechanic, contractor, subcontractor, materialman, machinist, manufacturer, registered architect, registered forester, registered land surveyor, registered professional engineer, or other person (as the case may be) claims a lien in the amount of (specify the amount claimed) on the house, factory, mill, machinery, or railroad (as the case may be) and the premises or real estate on which it is erected or built, of C.D. (describing the houses, premises, real estate, or railroad), for satisfaction of a claim which became due on (specify the date the claim was due, which is the same as the last date the labor, services, or materials were supplied to the premises) for building, repairing, improving, or furnishing material (or whatever the claim may be).'
No later than two business days after the date the claim of lien is filed of record, the lien claimant shall send a true and accurate copy of the claim of lien by registered or certified mail or statutory overnight delivery to the owner of the property or, if the owner's address cannot be found, the contractor, as the agent of the owner; provided, however, if the property owner is an entity on file with the Secretary of State's Corporations Division, sending a copy of the claim of lien to the entity's address or the registered agent's address shall satisfy this requirement. In all cases in which a notice of commencement is filed with the clerk of the superior court pursuant to subsection (b) of Code Section 44-14-361.5, a lien claimant shall also send a copy of the claim of lien by registered or certified mail or statutory overnight delivery to the contractor at the address shown on the notice of commencement;
(3) The commencement of a lien action for the recovery of the amount of the party's claim within 365 days from the date of filing for record of his or her claim of lien. In addition, within 30 days after commencing such lien action, the party claiming the lien shall file a notice with the clerk of the superior court of the county wherein the subject lien was filed. The notice shall contain a caption referring to the then owner of the property against which the lien was filed and referring to a deed or other recorded instrument in the chain of title of the affected property. The notice shall be executed, under oath, by the party claiming the lien or by such party's attorney of record, but failure to execute the notice under oath shall be an amendable defect which may be cured by the party claiming the lien or by such party's attorney without leave of court at any time before entry of the pretrial order and thereafter by leave of court. An amendment of notice pursuant to this Code section shall relate back to the date of filing of the notice. The notice shall identify the court or arbitration venue wherein the lien action is brought; the style and number, if any, of the lien action, including the names of all parties thereto; the date of the filing of the lien action; and the book and page number of the records of the county wherein the subject lien is recorded in the same manner in which liens specified in Code Section 44-14-361 are filed. The clerk of the superior court shall enter on the subject lien so referred to the book and page on which the notice is recorded and shall index such notice in the name of the then purported owner as shown by the caption contained in such notice. A separate lis pendens notice need not be filed with the commencement of this action; and
(4) In the event any contractor or subcontractor procuring material, architect's services, registered forester's services, registered land surveyor's services, or registered professional engineer's services, labor, or supplies for the building, repairing, or improving of any real estate, building, or other structure shall abscond or die or leave the state during the required time period for filing a lien action, so that personal jurisdiction cannot be obtained on the contractor or subcontractor in a lien action for the services, material, labor, or supplies, or if the contractor or subcontractor shall be adjudicated a bankrupt, or if, after the filing of a lien action, no final judgment can be obtained against him or her for the value of such material, services, labor, or supplies because of his or her death, adjudication in bankruptcy, or the contract between the party claiming the lien and the contractor or subcontractor includes a provision preventing payment to the claimant until after the contractor or the subcontractor has received payment, then and in any of these events, the person or persons furnishing material, services, labor, and supplies shall be relieved of the necessity of filing a lien action or obtaining judgment against the contractor or subcontractor as a prerequisite to enforcing a lien against the property improved by the contractor or subcontractor. Subject to Code Section 44-14-361, the person or persons furnishing material, services, labor, and supplies may enforce the lien directly against the property so improved in a lien action against the owner thereof, if filed within the required time period for filing a lien action, with the judgment rendered in any such proceeding to be limited to a judgment in rem against the property improved and to impose no personal liability upon the owner of the property; provided, however, that in such lien action for recovery, the owner of the real estate improved, who has paid the agreed price or any part of same, may set up the payment in any lien action brought and prove by competent and relevant evidence that the payments were applied as provided by law, and no judgment shall be rendered against the property improved. Within 30 days after filing such lien action, the party claiming the lien shall file a notice with the clerk of the superior court of the county wherein the subject lien was filed. The notice shall contain a caption referring to the then owner of the property against which the lien was filed and referring to a deed or other recorded instrument in the chain of title of the affected property. The notice shall be executed, under oath, by the party claiming the lien or by his or her attorney of record. The notice shall identify the court or arbitration venue wherein the lien action is brought; the style and number of the lien action, if any, including the names of all parties thereto; the date of the filing of the lien action; and the book and page number of the records of the county wherein the subject lien is recorded in the same manner in which liens specified in Code Section 44-14-361 are filed. The clerk of the superior court shall enter on the subject lien so referred to the book and page on which the notice is recorded and shall index such notice in the name of the then purported owner as shown by the caption contained in such notice. A separate lis pendens notice need not be filed with the commencement of this action.
(f) The filing fees for a claim of materialman's or mechanic's lien and any related document created pursuant to this Code section, including but not limited to a notice of commencement of action, shall be the amount set by Code Section 15-6-77 for liens on real estate and personal property.
History. Amended by 2008 Ga. Laws 766, § 2, eff. 3/31/2009.
OCGA § 44-14-361. Creation Of Liens; Property To Which Lien Attaches.
(b) Each special lien specified in subsection (a) of this Code section may attach to the real estate of the owner for which the labor, services, or materials are furnished if they are furnished at the instance of the owner, contractor, or some other person acting for the owner contractor and shall include the value of work done and materials furnished in any easement or public right of way adjoining said real estate if the work done or materials furnished in the easement or public right of way is for the benefit of said real estate and is within the scope of the owner's contract for improvements to said real estate.
Here is the OLD statute:
OCGA § 44-14-361.1. [Effective Until 3/31/2009]How Liens Declared And Created; Record; Commencement Of Action; Notice; Priorities; Parties; Limitation On Aggregate Amount Of Liens.
[Note: THIS STATUTE HAS BEEN SUPERCEEDED AS OF MARCH 31, 2009.]
"A.B., a mechanic, contractor, subcontractor, materialman, machinist, manufacturer, registered architect, registered forester, registered land surveyor, registered professional engineer, or other person (as the case may be) claims a lien in the amount of (specify the amount claimed) on the house, factory, mill, machinery, or railroad (as the case may be) and the premises or real estate on which it is erected or built, of C.D. (describing the houses, premises, real estate, or railroad), for satisfaction of a claim which became due on (specify the date the claim was due) for building, repairing, improving, or furnishing material (or whatever the claim may be)."
(3) The commencement of an action for the recovery of the amount of the party's claim within 12 months from the time the same shall become due. In addition, within 14 days after filing such action, the party claiming the lien shall file a notice with the clerk of the superior court of the county wherein the subject lien was filed. The notice shall contain a caption referring to the then owner of the property against which the lien was filed and referring to a deed or other recorded instrument in the chain of title of the affected property. The notice shall be executed, under oath, by the party claiming the lien or by such party's attorney of record, but failure to execute the notice under oath shall be an amendable defect which may be cured by the party claiming the lien or by such party's attorney without leave of court at any time before entry of the pretrial order and thereafter by leave of court. An amendment of notice pursuant to this Code section shall relate back to the date of filing of the notice. The notice shall identify the court wherein the action is brought; the style and number of the action, including the names of all parties thereto; the date of the filing of the action; and the book and page number of the records of the county wherein the subject lien is recorded in the same manner in which liens specified in Code Section 44-14-361 are filed. The clerk of the superior court shall enter on the subject lien so referred to the book and page on which the notice is recorded and shall index such notice in the name of the then purported owner as shown by the caption contained in such notice. A separate lis pendens notice need not be filed with the commencement of this action; and
(4) In the event any contractor or subcontractor procuring material, architect's services, registered forester's services, registered land surveyor's services, or registered professional engineer's services, labor, or supplies for the building, repairing, or improving of any real estate, building, or other structure shall abscond or die or leave the state within 12 months from the date such services, labor, supplies, or material are furnished to him or her, so that personal jurisdiction cannot be obtained on the contractor or subcontractor in an action for the services, material, labor, or supplies, or if the contractor or subcontractor shall be adjudicated a bankrupt, or if, after the filing of an action, no final judgment can be obtained against him or her for the value of such material, services, labor, or supplies because of his or her death, adjudication in bankruptcy, or the contract between the party claiming the lien and the contractor or subcontractor includes a provision preventing payment to the claimant until after the contractor or the subcontractor has received payment, then and in any of these events, the person or persons furnishing material, services, labor, and supplies shall be relieved of the necessity of filing an action or obtaining judgment against the contractor or subcontractor as a prerequisite to enforcing a lien against the property improved by the contractor or subcontractor. Subject to Code Section 44-14-361, the person or persons furnishing material, services, labor, and supplies may enforce the lien directly against the property so improved in an action against the owner thereof, if filed within 12 months from the time the lien becomes due, with the judgment rendered in any such proceeding to be limited to a judgment in rem against the property improved and to impose no personal liability upon the owner of the property; provided, however, that in such action for recovery, the owner of the real estate improved, who has paid the agreed price or any part of same, may set up the payment in any action brought and prove by competent and relevant evidence that the payments were applied as provided by law, and no judgment shall be rendered against the property improved. Within 14 days after filing such action, the party claiming the lien shall file a notice with the clerk of the superior court of the county wherein the subject lien was filed. The notice shall contain a caption referring to the then owner of the property against which the lien was filed and referring to a deed or other recorded instrument in the chain of title of the affected property. The notice shall be executed, under oath, by the party claiming the lien or by his or her attorney of record. The notice shall identify the court wherein the action is brought; the style and number of the action, including the names of all parties thereto; the date of the filing of the action; and the book and page number of the records of the county wherein the subject lien is recorded in the same manner in which liens specified in Code Section 44-14-361 are filed. The clerk of the superior court shall enter on the subject lien so referred to the book and page on which the notice is recorded and shall index such notice in the name of the then purported owner as shown by the caption contained in such notice. A separate lis pendens notice need not be filed with the commencement of this action.
(d) In any proceeding brought by any materialman, by any mechanic, by any laborer, by any subcontractor, or by any mechanic of any sort employed by any subcontractor or by any materialmen furnishing material to any subcontractor, or by any laborer furnishing labor to any subcontractor, to enforce such a lien, the contractor having a direct contractual relationship with the subcontractor shall not be a necessary party; but he may be made a party. In any proceedings brought by any mechanic employed by any subcontractor, by any materialmen furnishing material to any subcontractor, or by any laborer furnishing labor to any subcontractor, the subcontractor shall not be a necessary party; but he may be made a party. The contractor or subcontractor or both may intervene in the proceedings at any time before judgment for the purpose of resisting the establishment of the lien or of asserting against the lienor any claim of the contractor or subcontractor growing out of or related to the transaction upon which the asserted lien is based.
This statute has been superceeded as of March 31, 2009.
This issue is not discussed in this Blog, but is discussed Owen C. Murphy's very fine well written article recently published in the Real Estate Section's Newsletter Spring 2009. See, Section IV, Infra.
12. The form for the "Interim Waiver and Release Upon Payment" has been
overhauled with new language which, as specified in the amendment, must be
"in boldface capital letters in at least 12 point font." The most
substantial change to the form of the interim lien waiver is to provide a
notice that the party executing the interim waiver shall be conclusively
deemed to be paid in full in the amount stated in the waiver, even if
payment has not actually been received, upon the expiration of sixty (60)
days after the date stated in the interim lien waiver. (§ 44-14-366(c)).
13. The language of the final lien waiver form now entitled "Waiver and
Release Upon Final Payment," is also amended by providing the same
formatting requirements as the interim waiver and again providing for the
expanded sixty (60) day period after which the party will be conclusively
deemed to have been paid unless an affidavit of nonpayment or claim of lien
has been filed during that time period. (§ 44-14-366(d)).
14. O.C.G.A. § 44-16-366(f)(2)(c) has been amended to specifically provide
for this new rule, now referenced in both lien waiver forms, that monetary
amounts stated in lien waivers are conclusively deemed to have been paid
upon the expiration of sixty (60) days, thus expanding the thirty (30) day
period provided under the old statute, unless an affidavit of nonpayment or
claim of lien is filed within that time period.
15. The amendments overhaul the form of the affidavit of nonpayment which
can be filed pursuant to O.C.G.A. § 44-16366. The new form provides that a
copy of the affidavit of nonpayment must be sent to the owner of the
property by registered or certified mail or overnight delivery within seven
(7) days of being filed. It also provides that if the project has a notice
of commencement on file and the party filing the affi-
II. Lien Text.
5. The substance of the text of the claim of lien must now include a
statement of the expiration date of the lien (three hundred ninety-five
(395) days from the date of filing of the lien if no lien action and notice
of commencement of lien action are filed). The formatting requirements (at
least 12 point bold font) and exact language for this notice are provided
in § 44-14-367. The exact text required in the body of the lien is as
This claim of lien expires and is void 395 days from the date of filing of
the claim of lien if no notice of commencement of lien action is filed in
The failure to include this language invalidates the lien and prevents it
from even being tiled. (§ 44-14361.1(a)(2); § 44-14-367). The new
§44-14-367 goes on to provide that "[n]o release or voiding of [expired]
liens shall be required," thus creating the more efficient "self-expiring"
6. Although no recommended or suggested text is given, the amendments
provide that the text of the claim of lien shall also contain a notice to
the owner of the property that the owner has a right to contest the lien,
presumably referring to the new § 44-14-368, which creates the notice of
contest of lien which property owners can now file. (Discussed at No. 16,
infra). Again, the failure to include this language will invalidate the
lien. (§ 44-14361.1(a)(2); § 44-14-368).
III. Notice Requirements.
7. The lien statute previously required that a copy of the claim of lien be
sent to the owner of the property via registered/certified mail or
statutory overnight delivery "at the time of filing for record his claim
lien." This phrase was ambiguous and required interpretation as to exactly
what time frame would qualify as "at the time of filing" or how literally
such a phrase could be taken. The amendment changes the language to provide
that this notice must be sent to the owner no later than "two business
days" after the date the claim of lien is filed. (§ 44-14-361.1(a)(2)).
8. Regarding this same requirement of sending a copy of the claim of lien
to the owner, the statute has been amended to state that a hen claimant may
provide the contractor with the statutory notice, in lieu of the owner,
only when the owner's address "cannot be found." (§ 44-14-361.1(a)(2)).
This restricts the previous rule which allowed the lien claimant the option
of providing a copy of the lien to the contractor, as agent for the owner,
under any circumstances. The amendment also provides that if the property
owner is a legal entity (such as a corporation) then a copy of the claim of
lien can be sent to the entity's address as listed on the Secretary of
State or the registered agent's address. (§ 4414-361.1(a)(2)).
9. The statute has been amended to require that on all projects where a
notice of commencement has been filed with the Superior Court pursuant to §
44-14-361.5, the lien claimant must, in addition to sending a copy of the
claim of lien to the owner, send a copy of the claim of lien via registered,
davit of nonpayment is not in privity of contract with the property owner,
a copy of the affidavit must also be sent to the contractor at the address
shown on the notice of commencement. The same new alternative address
options for entities on file with the Secretary of State apply here as well.
V. Notice to Contest Lien
16. The new code section 44-14-368 is created and provides that an owner or
contractor may challenge a lien and shorten the 365-day time period within
which the lien claimant must commence a lien action by filing a "Notice of
Contest of Lien" in the Superior Court in the form and format provided in
the new code section. The Clerk of Superior Court is required to cross
reference this notice with the lien itself. The filing of the Notice of
Contest of Lien requires the lien claimant to commence his lien action
within sixty (60) days of the receipt of the Notice and to file his notice
of commencement of lien action within thirty (30) days of the filing of
that action. It further provides that the lien will be extinguished and
invalidated as a matter of law upon expiration of ninety (90) days after
the filing of the Notice of Contest of Lien if the lien action and notice
of commencement of lien action have not been filed within that time period.
Again, it-is not-necessary to record a release of lien or obtain a decree
from a judge as to the invalidity of the lien when the deadlines are not
met -- it expires automatically.
The owner or contractor filing the Notice of Contest of Lien must send a
copy of the Notice to the lien claimant (via registered, certified or
overnight mail) within seven (7) days of filing the Notice, service being
deemed complete upon mailing.
CONSTRUCTION LIEN LAW:
SIXTEEN NOTABLE CHANGES TO
GEORGIA'S LIEN STATUTES
By: Owen C. Murphy
You could miss it under the old law, but it was substantially more vague.
Posted by Hugh Wood at 5:23 PM 4 comments: Links to this post
Labels: "Hugh Wood" Mechanic's Lien Georgia Materialman's Lien "44-14-361.1" "SB 374"
Posted by Hugh Wood at 10:56 PM 7 comments: Links to this post