Whenever a judgment is entered in United States District Court, generally under the "Fines and Restitution Pursuant to the Anti-Terrorism and Effective Death Penalty Act of 1996," it acts as a lien against property.  These liens are typically the result of criminal restitution orders against a defendant from a conviction for some criminal act.  In cases where a defendant owes any amount of restitution or fine and special assessment, the United States Attorney's office files a lien in the defendant's county of residence, and any other county where they may have interest in real property.  These liens are similar to Federal Tax liens in that they attach to the property and property rights of the defendant.  The lien remains in effect for 20 years from the date the judgment is entered or 20 years from the date the defendant is released from prison.

The issue most lenders encounter arises when the defendants' to whom these liens have been filed against become borrowers facing foreclosure.  Unlike other junior liens, a notice of lien by the Department of Justice cannot be foreclosed out by a prior mortgage lienholder.  In order to proceed with foreclosure, the United States Attorney's Office must either provide a release or consent to a non-judicial foreclosure.  It is for this reason that when a notice of lien from the Department of Justice is found in the title exam, the current foreclosure proceeding may need to be cancelled or postponed, as there are a number of documents that are required and must be complied with for the United States Attorney's Office to review.  The documents that they require are:

1.         Copy of the Deed to Secure Debt which is the subject of the foreclosure;  

2.         A title search or title insurance information showing when all interests in the property were recorded, including the interest into the foreclosing lender;           

3.          Information showing the approximate value of the real estate, including an appraisal with comparables or broker's price opinion;

4.         Information regarding the payoff amounts of the foreclosing lender's interest, and any other interests or liens which are believed to be prior to the lien of the United States;

                5.         Loan underwriter's notes and requirements;

                6.         URLA or other loan application and;

                7.         HUD-1 Settlement Statement.

Once this information is received, the United States Attorney's Office reviews it to determine if they believe there is any equity in the property.  If they conclude there is no equity in the property which is the subject of the foreclosure action, they typically will draft a release of the subject property which is then recorded in the real estate records.  However, if they feel there is equity in the property they will request a payment to release the lien.  While these payoffs are typically not for the entire lien amount, they can be substantial.  Unfortunately, in order to proceed with foreclosure lenders must provide the funds to pay off the lien so they may obtain a release which can be recorded in the real estate records.  Once the release is of record, then the foreclosure process can resume.

Georgia law states that a president or vice president and a secretary or assistant secretary shall execute documents on behalf of a corporation.  It is also acceptable for a corporate officer authorized by the corporate resolution documents to sign as long as the secretary or assistant secretary signs and a corporate seal is affixed.   Be careful when using corporate seals; make sure you affix the correct seal for the entity who is executing the document.  In Tennessee and Mississippi, any corporate officer named in the corporate resolution documents may execute instruments on behalf of the corporation.

Proper checks should be in place to ensure that the individuals executing documents on behalf of the corporation have authorization to do so.  It is a good idea to provide our firm with the corporate resolution documents naming the authorized signors of the corporation.  We will keep this information in our file in case we are called upon by a third party to prove authorization.  Each officer should sign the document as they would normally sign their name and the individual's name and capacity should be clearly noted under the signature. 

When documents are executed by power of attorney, the signing authority should be clearly stated on the face of the document.  The best way to show the relationship is to include attorney-in-fact language in the signature block.  It is equally important to verify that the power of attorney grants authority to the principal to execute the specific document and that the power of attorney is effective prior to executing documents under its authority.  In Georgia, the title companies will allow a copy of a power of attorney recorded in Georgia to be attached to the document as an exhibit.  A good rule of thumb is to record the power of attorney in the four largest counties in Georgia to provide notice of authority to subsequent title examiners and attorneys.  Mississippi title companies accept a similar practice but in some instances require that the power of attorney be recorded prior to the execution of the document to be signed by power of attorney.  The requirements in Tennessee are a bit more stringent. The power of attorney should be recorded in the county where the property is located and a reference to the recorded power of attorney should be included on the face of the document. 

To be in proper recordable form, all documents must be signed in front of a notary who is commissioned in the state where the document is being executed.  The key is that the notary should be present when the corporate officer signs.  The exception to this rule is when a notary acknowledgment is used. In these instances, the document may be executed outside the presence of the notary but the officer must then present themselves to the notary to acknowledge that they made the signature.  The commission's expiration date should be included on the notary seal or at least written under the notary's signature.  It is good practice to perform quality control checks from time to time to ensure your notaries' commissions are up to date.  In Georgia, unlike Tennessee and Mississippi, all documents must be witnessed.  If a notary acknowledgement is used, Georgia requires two witnesses.   The witnesses should be present when the corporate officer executes the documents and the notary may not also serve as a witness.

It might sound simple, but following these guidelines will ensure that your company is adhering to applicable laws and industry practices surrounding this controversial topic.  If you have any questions regarding your current practice, please do not hesitate to contact us. 

It is important to evaluate your document execution procedures from time to time in order to identify areas that need improvement. Follow these straightforward principles to create a strong foundation for legal compliance in this area.