Editor: David Reiss
Brooklyn Law School

October 15, 2013

Georgia District Court Holds Foreclosure May Be Wrongful Where Security Deed and Note Are “Split”

By Gloria Liu

In Morgan v. Ocwen Loan Servicing, LLC, No. 1:10-cv-3555-AT (N.D.Ga. July 7, 2011), homeowner obtained a residential mortgage loan memorialized by two documents: a promissory note and a security deed. The original grantee of the promissory note was Guaranteed Rate. The original grantee of the security deed was MERS “as nominee” for Guaranteed Rate and its successors and assigns. Guaranteed Rate later transferred the note to Taylor, Bean & Whitaker. Subsequently, MERS executed a purported assignment of the security deed to Ocwen.

The court rejected the argument that the security deed is void because of the fact that MERS was named as the grantee-as-nominee in the security deed rather than Guarantee Rate, the actual lender and payee on the note. It reasoned that the argument is is unsupported by Georgia law as separation of the note and security deed creates a question of what entity would have the authority to foreclose, but does not render either instrument void.

In addressing the question of wrongful foreclosure, the court held it need not reach the question of whether an agent for the holder of the debt can carry out a power of sale foreclosure under Georgia law, as Ocwen did not advertise the foreclosure as agent for any disclosed principal.

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