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How Foreclosure Law Works in Georgia
Throughout the United States, personal home ownership makes up part of the “American Dream.” However, you may be surprised to learn that the states themselves determine the legal basis upon which mortgage companies loan money and protect their interests.
Georgia is known as a “title” state, meaning that under Georgia law, the borrower gives legal title to his home to the lender at closing using a document called a “deed to secure debt” or a “security deed.” This deed usually contains a “power of sale” clause. This clause authorizes the lender to advertise and sell the borrower’s property very quickly in the case of default.
Non-judicial Foreclosures in Georgia
Unlike other states, Georgia law permits non-judicial foreclosures. In other words, a lender does not have to go before a judge to obtain permission to foreclosure. Instead, in the event of a default, the lender must provide notice to the homeowner as provided in the deed to secure debt and/or promissory note and as provided by Georgia law. This notice process can take place in less than 40 days.
Prior to actually selling the property, the lender must publish notice of the pending sale in the legal newspaper where the property is located for four consecutive weeks. The notice of sale must contain the date, time and place of the sale along with a description of the property, the names of the borrower and lender and a reference to the power of sale provision.
Foreclosure sales in Georgia are conducted by the lender’s attorney, and may only be conducted on the first Tuesday of a calendar month. Sales are conducted in an auction format, and take place literally on the courthouse steps.
Frequently, but not always, the lender “buys” the foreclosed property if there are no bidders. For example, if the property being auctioned is worth $250,000, and the mortgage company lien is $248,000, no investor would buy the property because there is no equity spread. On the other hand, if the property is worth $250,000 and the mortgage debt totals only $100,000, there would likely be active bidding on the property. The winning bidder would have to pay off the mortgage company lien along with any tax liens.
Your Rights Following Foreclosure
Georgia law does not provide for any right of redemption by the former homeowner. Once the foreclosure sale is conducted, title to the property is transferred. In the event that the lender did not follow the requirements of the foreclosure law, the former homeowner could pursue a claim for wrongful foreclosure. These types of claims are difficult to pursue - if you feel that you have been a victim of a wrongful foreclosure (usually related to improper notice), you should speak with an attorney familiar with this type of cause of action.
If the foreclosure sale does not generate enough money to satisfy the mortgage note, the lender can file an action within 30 days of the foreclosure sale in the appropriate Superior Court to “confirm” a deficiency. These deficiency confirmation hearings were relatively rare when property values were holding steady, but we are seeing more of them as real estate prices have declined.
When a lender foreclosures on a property, all junior liens (except tax liens) are extinguished. However, lenders with junior liens can still sue the homeowner personally on the promissory note that accompanies most security deeds.
More reading: Georgia Foreclosure Law article on web site of McCurdy and Candler, a law firm that represents mortgage creditors.
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