Security Deed and Note Expiry

[Chad U.]

Let's say I'm carrying note with a Security Deed as collateral.  Terms of the loan are no interest with a balloon payment upon expiration of the note.  If the note has expired and the payment is not made within that timeframe (therefore defaulted), what are the statute of limitations in which I have to act to enforce this?  Would I need to send of a Notice of Default letter first, or can I just demand payment and/or initiate foreclosure.  It is in a non-judicial state, and I'm loaning my own funds so assuming a servicer is not required.  

Hoping @John Thedford or @Jay Hinrichs can shed some light. 

[Dion DePaoli]

You have a Security Deed so the property is located in Georgia I assume since that is the only place those are used.   Security Deeds are variance of a Deed of Trust whereby the Mortgagee has legal title and the borrower retains equitable title with a right of redemption.  As such, the instrument should point out which steps need be taken to give notice of default and how the termination of the right of redemption is carried out, otherwise known as foreclosure.  

Tyically you will have to send a Notice of Default or Demand Letter with appropriate loan and default details.  More than likely you need to deliver that onto the borrower in person.  The borrower must be given time to cure the default, which in your case is full payment due to maturity.  Once that time to cure has passed then a Mortgagee can set up a sale date for foreclosure auction which the borrower can still redeem from.  I think there is another notice in there too.  Also, for that to take place you need to ensure there is a "Power of Sale" clause in the security instrument.  There should be but make sure.  If not, you have to file a complaint with the court to carry out the process.  Power of sale is what makes foreclosures "non-judicial".

On another note, you wrote a zero interest loan?  That was silly.  You will be charged interest by the IRS.  They will impute the minimal interest and charge it to you.  Never make 0% loans.  For reference here is the IRS rule:  Applicable Federal Rates

Statute of Limitations on debt collection is typically 4 years in most states and is 6 years in Georgia.  There is a small variance in how they start the clock.  In Georgia it is from the date of last payment on the account.  It sounds like you just made this loan and it is still fairly new so you should be fine there.

You should engage an attorney and have them help you with the steps to enforce the security instrument.  Not that big of a deal not having a servicer since no payments were being made during the term of the loan however you will need to make sure you are compliant moving forward with any communication you send reference the default.  An attorney should be able to help you.