GA Code § 44-14-5 (2021)
2021 Georgia Code|Title 44 - Property|Chapter 14 - Mortgages, Conveyances to Secure Debt, and Liens|Article 1 - In General|§ 44-14-5. Practices Prohibited in Connection With Certain Residential Real Estate Transactions

  As used in this Code section, the term:   "Borrower" means a person who has secured an indebtedness with a security interest in real property or a person who has taken an interest in real property subject to an outstanding security interest in the real property and has notified the holder of the security interest that he has taken the real property and assumed the indebtedness secured by the real property.   "Lender" means a person who has a security interest in real property, which interest is evidenced by a security deed, a mortgage, a trust deed, a bond for title, or other security document granting a security interest in real property to secure an indebtedness owed to the lender.   "Person" means any individual, firm, partnership, corporation, joint venture, association, company, agency, syndicate, estate, trust, business trust, receiver, fiduciary, or other group or combination or any other entity whatsoever.     Subject to the limitations and exceptions provided in this Code section, any lender with a security interest in real estate shall not, directly or indirectly:   Accelerate or mature the indebtedness secured by the real estate on account of the sale or transfer of the real estate or on account of the assumption of the indebtedness, except as provided in paragraph (5) of this subsection. This paragraph shall not apply if the person to whom the real estate would be sold or transferred does not intend to occupy the property as the person's principal residence, if such occupancy is a requirement imposed by federal regulatory authorities upon the lender;   Increase the interest rate above the existing interest rate of the indebtedness unless:   The borrower who is primarily liable for the repayment of the indebtedness shall make a request in writing to the lender at the time of the making of the application to the lender for approval of the transfer or, at any time prior to the granting or denying of approval of the transfer by the lender, a request that the borrower desires to be relieved of liability under the terms of the security instrument and the note secured thereby; and   The lender furnishes written evidence to the borrower that the borrower has been relieved of liability under the terms of the security instrument and the note secured thereby. In the event the lender so relieves the borrower of liability after having been requested to do so by the borrower, the lender may increase the interest rate on the indebtedness; provided, however, that the lender shall not escalate the interest in excess of 1 percent per annum above the existing interest rate at the time of the transfer nor shall the lender be entitled to escalate the interest rate at any time other than at the transfer of title and then not more often than once in any 24 month period. Any subsequent transfer of the property after 24 months from the time of the last escalation of interest shall likewise be limited to a 1 percent per annum increase above the interest rate of the indebtedness existing at the time of the subsequent transfer;     Charge, collect, or attempt to collect any transfer fee on account of the sale or transfer of such real estate or on account of the assumption of such indebtedness in excess of:   One-half of 1 percent of the principal amount of the indebtedness outstanding on the date of the transfer or $150.00, whichever is greater, in the event the lender does not relieve the borrower of liability for the repayment of the indebtedness;   One percent of the principal amount of the indebtedness outstanding on the date of the transfer, in the event the lender does not escalate the interest rate but does relieve the borrower of liability for the repayment of the indebtedness; or   One-half of 1 percent of the principal amount of the indebtedness outstanding on the date of such transfer or $250.00, whichever is greater, in the event the lender escalates the interest rate and relieves the borrower of liability for the repayment of the indebtedness.  Any borrower who has been relieved of liability for the repayment of the indebtedness may submit his affidavit of such fact to the clerk of the superior court in the county where the security instrument is recorded, which clerk shall enter a notation on the recorded security instrument to the effect that the borrower has been relieved of liability under the terms of the security instrument and the note secured thereby. Any such transfer fee shall not be considered interest and shall not be taken into account in the calculation of interest and shall not be considered a "rate of charge" as that term is defined in Code Section 7-4-30;      Enforce or attempt to enforce the provisions of any mortgage, deed of trust, or other real estate security instrument executed on or after July 1, 1979, which provisions are contrary to this Code section;   Withhold approval or disapproval of the sale or transfer of the real estate and the assumption of the indebtedness beyond 50 days after receipt by the lender of the completed written application for same on such form as may be required by the lender (a copy of which shall be furnished to the applicant) to determine the financial ability to retire the indebtedness of the applicant according to the lender's terms; otherwise, the sale or transfer and the assumption shall be approved; provided, however, that the parties by mutual agreement may extend the aforesaid period of time for a period not to exceed 30 days. The lender shall have the right, if permitted under the security instrument, to accelerate the indebtedness if the borrower transfers the property to a person if:   The lender has reasonably determined, based upon the standards provided in this Code section, that such person is financially incapable of retiring the indebtedness according to the terms of the security instrument; or   The lender is entitled under this Code section and the security instrument to increase the interest rate on the indebtedness, and the person to whom the real estate is transferred declines to agree to such increase.  Such acceleration shall be permitted only within a 60 day period after the lender acquires actual knowledge of the sale or transfer to such person; and      Disapprove the sale or transfer of the real estate and the assumption of the indebtedness for any reason other than the credit worthiness of the person to whom the real estate would be sold or transferred, which disapproval is based upon standards normally used by persons in the business of making loans on real estate in the same or similar circumstances; otherwise, any due-on-sale clause or similar provision in the security instrument shall be deemed to be against public policy and shall be void.     The maximum increase allowed in paragraph (2) of subsection (b) of this Code section and the maximum fee allowed in paragraph (3) of subsection (b) of this Code section shall not be deemed to be required, minimum, or ordinary; but the interest increase and fee may, in any case, be less than the amount allowed.   This Code section shall be applicable only to a security interest in real property utilized as residential dwelling units other than apartments, motels, hotels, and nursing homes and only if the original amount of the loan is less than $100,000.00.   This Code section shall not be applicable in those cases in which the secretary of housing and urban development, or his successor, matures the indebtedness on multiple-family housing projects pursuant to the current law and regulations of the Federal Housing Administration.   This Code section shall not be applicable to a person with a security interest in real estate, which person is not regularly engaged in the business of making real estate loans.   In the event that the party assuming the indebtedness declines to agree to an increase in the interest rate as provided in paragraph (2) of subsection (b) of this Code section, the indebtedness may be prepaid without penalty or increased interest at any time within 60 days after the assumption; but if the party does not make the prepayment within the 60 day period, the party shall be liable for the increased interest rate from the date of the assumption; and any prepayment penalty provided for in the security instrument shall thereafter be in effect. Any law to the contrary notwithstanding, such increased interest and the outstanding indebtedness shall be secured by the security instrument securing the indebtedness with the same priority as if the increased interest rate were originally set forth in the note evidencing the indebtedness.   Nothing contained in this Code section shall be construed so as to permit a lender to increase the interest rate beyond applicable usury laws.   Nothing in this Code section shall be construed to limit the right of the Federal Land Bank to increase or decrease the interest rate of any loan so long as the increase or decrease is pursuant to the terms of the variable interest rate provision of the security instrument or the note secured thereby and the increase or decrease is not the result of the transfer of the property serving the loan.   This Code section shall not be applicable to loans made by the Farmers Home Administration, which loans provide for interest subsidies or variable interest rates based on the income of the borrower, or to loans made by the Georgia Housing and Finance Authority, the Urban Residential Finance Authority of the City of Atlanta, or other similar state or local authorities.   This Code section shall not be applicable to loans on or secured by real property utilized as residential dwelling units as that term is used in subsection (d) of this Code section, which loans are made by an employer to an employee as an employment benefit.   In addition to the fee authorized by paragraph (3) of subsection (b) of this Code section, a lender may charge and collect a fee to recover the actual costs incurred by the lender in obtaining a credit report on the person to whom the real estate would be sold or transferred in instances where the borrower has requested to be relieved from liability for the indebtedness as well as in instances where the borrower has not made such request, but no investigation by the lender to determine credit worthiness shall authorize the lender to withhold approval or disapproval of the sale or transfer of the real estate beyond the time limitation specified in paragraph (5) of subsection (b) of this Code section.   Nothing in this Code section shall be construed to limit the right of a lender to increase or decrease the interest rate on the indebtedness so long as such increase or decrease is effected pursuant to the terms contained in the security instrument or the note secured thereby or by mutual agreement between borrower and lender, provided that such increase or decrease is not the result of the sale or transfer of the property securing such indebtedness or the assumption of the indebtedness, unless such increase upon a sale or transfer of such property or assumption of the indebtedness is otherwise permitted by this Code section.    (Ga. L. 1979, p. 345, §§ 1, 2; Ga. L. 1980, p. 585, § 1; Ga. L. 1981, p. 480, §§ 1-9; Ga. L. 1991, p. 1653, §§ 2-3.)   Editor's notes.   - Ga. L. 1981, p. 480, § 10, not codified by the General Assembly, provided as follows: "This Act shall become effective upon its approval by the Governor or upon its becoming law without his approval; and the provisions of the Act shall apply to any transfer or sale of real estate and the assumption of indebtedness in connection therewith which is accomplished on or after the effective date of this Act; but the Act and this amendatory Act shall not affect or impair the rights, duties, or interests arising out of or flowing from instruments executed prior to the effective date of this amended Act."   Law reviews.   - For article surveying 1979 legislative developments in commercial law, see 31 Mercer L. Rev. 13 (1979). For article surveying recent legislative and judicial developments in Georgia's real property laws, see 31 Mercer L. Rev. 187 (1979). For article surveying developments in Georgia real property law from mid-1980 through mid-1981, see 33 Mercer L. Rev. 219 (1981).   JUDICIAL DECISIONS   State law preempted by federal law.    - Georgia laws restricting the enforcement of "due-on-sale" provisions have been preempted by the Garn-St. Germain Depository Institutions Act of 1982 (P.L. 97-320, 96 Stat. 1469) which expressly permits a lender to "enforce a contract containing a due-on-sale clause with respect to a real property loan." Aetna Cas. & Sur. Co. v. Valdosta Fed. Sav. & Loan Ass'n, 175 Ga. App. 614, 333 S.E.2d 849 (1985).    O.C.G.A. § 44-14-5 does not conflict with Georgia's long-standing policy of adjusting usury laws and other regulatory policies to promote a stable and active residential mortgage lending industry. The scheme under O.C.G.A. § 44-14-5 that attempts to restrict loan modifications made in connection with due-on-sale clauses and thereby blocks a traditional method of adjusting mortgage pool rates; however, it does not necessarily limit a lender's ability to adjust market-pool spreads because it was: totally prospective in operation; coupled with a floating usury rate; and accompanied by changes in the traditional long term, fixed rate lending practices. Lindenberg v. First Fed. Sav. & Loan Ass'n, 528 F. Supp. 440 (N.D. Ga. 1981), aff'd, 691 F.2d 974 (11th Cir. 1982).    In the plan of the General Assembly, O.C.G.A. § 44-14-5(b)(1) through (3), (5), and (6) provide the substantive provisions of the Act and O.C.G.A. § 44-14-5(b)(4) provides for its operation. Lindenberg v. First Fed. Sav. & Loan Ass'n, 90 F.R.D. 255 (N.D. Ga. 1981).    O.C.G.A. § 44-14-5(b)(4) is the provision that makes that section's prohibitions operative; by itself, it has no meaning. Rather, it takes on meaning in the context of O.C.G.A. § 44-14-5(b)(1) through (3), (5), and (6) ; these are the paragraphs that determine what provisions and practices are contrary to that section and cannot be enforced pursuant to O.C.G.A. § 44-14-5(b)(4). Lindenberg v. First Fed. Sav. & Loan Ass'n, 90 F.R.D. 255 (N.D. Ga. 1981).    Where three parties are involved, release of the original borrower and acceptance of a purchaser-grantee is valid consideration  for a new contract at new interest rates, even before expiration of the original loan term. Lindenberg v. First Fed. Sav. & Loan Ass'n, 528 F. Supp. 440 (N.D. Ga. 1981), aff'd, 691 F.2d 974 (11th Cir. 1982).    Contracts entered into under one usury statute remain enforceable on their original terms even if the statute changes,  whereas any contract entered into after changing the law is to be governed by the new law even if the new contract concerns a preexisting debt, such that even if an original loan contract was void for usury, a new promise to pay the loan after an increase in the usury limits was binding under the new limits. Therefore, the plaintiffs' promise to pay the remaining portion of their grantors' debt must be judged at the time of their promise. Lindenberg v. First Fed. Sav. & Loan Ass'n, 528 F. Supp. 440 (N.D. Ga. 1981), aff'd, 691 F.2d 974 (11th Cir. 1982).   OPINIONS OF THE ATTORNEY GENERAL    O.C.G.A. § 44-14-5 is binding on federally chartered savings and loan associations. 1979 Op. Att'y Gen. No. U79-17.   Effect on instruments executed prior to effective date of section.    - While O.C.G.A. § 44-14-5 applies to transactions involving instruments executed prior to its effective date, the exact effect of that section on these transactions must be resolved after the instruments and the transactions are studied on a case by case basis. 1979 Op. Att'y Gen. No. U79-17.   RESEARCH REFERENCES   ALR.   - Validity and enforceability of due-on-sale real-estate mortgage provisions, 61 A.L.R.4th 1070.   Validity and construction of provision of mortgage or other real-estate financing contract prohibiting prepayment for a fixed period of time, 81 A.L.R.4th 423.