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Tennessee Foreclosure Deficiency Statute; Is 86% the New Magic Number for Calculating Foreclosure Bids?


In response to the thousands of foreclosures of commercial and residential real estate that have taken place across Tennessee over the last few years, the legislature overhauled the Tennessee Deficiency Statute, which governs a lender’s collection of the balance owed by a borrower after foreclosure occurs.  The Tennessee deficiency law, which is codified at Tenn. Code Ann. Section 35-5-118, provides generally as follows: Subsection (a) confirms that Lenders are entitled to deficiency judgments in Tennessee. Sub-section (b) defines a deficiency judgment as “the total amount of indebtedness prior to the sale plus the costs of the foreclosure and sale, less the fair market value of the property at the time of the sale” and codifies the principle that a sale at public auction creates a rebuttable presumption that the sale price of the property is equal to the fair market value of the property at the time of sale. Subsection […]

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Should Lenders Notify Insurance Providers Regarding Foreclosure Proceedings Against Residential or Commercial Real Estate?


The Tennessee Court of Appeals recently decided an important case addressing whether lenders are required to notify property insurers regarding commencement of non-judicial foreclosure proceedings against residential or commercial real estate.  U.S. Bank, N.A. v. Tenn. Farmers Mut. Ins. Co., No. W2012-00053-COA-R3-CV (Tenn. Ct. App.  Nov. 29, 2012). In the US Bank case, the owner of the residence failed to make timely mortgage payments, and the bank commenced foreclosure proceedings.  Soon thereafter, the owner filed for bankruptcy, which stayed the foreclosure proceedings.  After the foreclosure proceedings were stayed, the residence was destroyed in a fire, apparently as a result of methamphetamine production in the home.  After the fire, the bank made a claim to recover insurance proceeds, and the insurance company refused to pay the claim.  The insurance company’s refusal to pay the claim was based on the bank’s failure to notify the insurance company regarding commencement of foreclosure.  The […]

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“Force Majeure” – What Happens When the Worst Happens?


  When Hurricane Sandy hit the East Coast recently, the resulting power outages, gasoline shortages, flooding, wind damage, and other devastation made it difficult or impossible for businesses in the hurricane’s path to function normally.  In fact, one of my clients was featured for its efforts to keep its data center in lower Manhattan running despite loss of power.  When the client called me to discuss contingency plans under its lease, the first provision I looked at was “Force Majeure”. Force majeure can come into play in a transactional instance, where it is a fairly standard provision of many contracts, like in my client’s lease, or in a litigation instance, where it can be an affirmative defense to a breach of contract claim. Under Tennessee law, the affirmative defense of force majeure is known as “an Act of God” and “any misadventure or casualty is said to be caused by the […]

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FDIC Lawsuits Against Insiders at Failed Banks — Is Loudermilk Just the Beginning?


In the current economic downturn, the State of Georgia has seen more bank failures than any other state in the nation.  Because of Georgia’s disparate portion of the country’s bank failures to date, other states have looked to what has happened in Georgia to gauge the outcome, results, and effects of bank failures on lenders, borrowers, and the economy.  There are signs that the worst may be behind the State of Georgia, but the fallout continues for past directors and executives at some of the failed banks.  The FDIC has elected to sue insiders at 11 of the failed Georgia banks.  Most recently, on November 30, 2012, the FDIC brought suit in the Northern District of Georgia, Atlanta Division, against nine former insiders of the failed Buckhead Community Bank.  The insiders included Charlie Loudermilk, who is the founder of the rent-to-own chain of stores Aaron’s Inc.  Based on the allegations […]

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You Don’t Have to Pick Your Poison: Foreclosure, Deficiency Judgments, and other Collection Strategies in Georgia


I’ve had several recent discussions with lender clients regarding election of remedies in connection with loan defaults.  I wrote about this topic a couple of years ago, so I’ve decided to re-post the article from the Georgia Real Property Law Section Newsletter, Summer 2009. You Don’t Have to Pick Your Poison:  Foreclosure, Deficiency Judgments, and other Collection Strategies in Georgia Despite record numbers of foreclosure filings in Georgia in recent months, many lenders are not aware of the full array of collection strategies available to them in pursuing deficiency judgments against borrowers, guarantors, or both. A basic understanding of the Georgia confirmation statute is critical to evaluate properly all available collection strategies.  Pursuant to O.C.G.A. § 44-14-161, to obtain a deficiency judgment after foreclosure, a lender must report a sale to a superior court judge in the county where the foreclosed property is located within thirty days after the sale […]

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