Georgia Foreclosure Law
Georgia is a title theory state. In Georgia, the borrower (mortgagor) actually gives legal title to the lender (mortgagee) through the instrument known as a “Deed to Secure Debt” or “Security Deed”. The lender actually owns the property until the debt is paid and allows the borrower to use and possess the property. While the lender could technically demand immediate possession of the property if the mortgagor defaults, practically a foreclosure through a power of sale clause is the preferred method to retake possession of the property. The uniform provisions of the Deed to Secure Debt are very similar to those that you would see in a typical mortgage. The area of greatest divergence occurs when there is a default by the borrower (mortgagor) and subsequent foreclosure.
If the borrower fails to pay or commits some other non-monetary act of default the lender may move to declare the Deed to Secure Debt and Promissory Note in default (in Georgia most lenders use the standard FannieMae/FreddieMac form note). To enforce default, the lender must make a written demand upon the borrower (mortgagor) setting forth a breach and accelerating the debt (declaring the entire debt due and payable immediately). Keep in mind that federal fair debt provisions apply and notices required under the Fair Debt Collection Practices Act (i.e. validation of debt etc.) are generally sent to the borrower (mortgagor) at this time as well.
The overwhelming majority of all foreclosures in Georgia are accomplished by the use of the power of sale in the Deed to Secure Debt. This is a non-judicial sale, wherein the lender declares default, follows the statutory notice and sells the property on the courthouse steps. However, other less popular methods may also be employed in Georgia. For example, judicial foreclosure may also be accomplished, but is very rare. Judicial foreclosure involves filing a petition in Superior Court describing the case, the amount of money owed and the property to be foreclosed. Upon the filing of the petition, the court will grant a "rule" directing that the unpaid principal, interest and costs be paid to the court. The rule must be published two times per month for two months. As an alternative to publication, the notice can be served on the borrower, the borrower’s agent, or the borrower’s attorney, at least 30 days before the money has to be paid in court. Judicial foreclosure would only be necessary if a lender uses some type of security other than a Deed to Secure Debt or Security Deed that does not contain a power of sale.
In non-judicial foreclosure, the Lender must follow the notice requirements extremely carefully. A notice of sale must be served on the original mortgagor or current owner (if his identity has been made known to or acknowledged by the lender) by certified mail, return receipt requested. The notice must be sent to the borrowers last known address, which is the address listed on the Deed to Secure Debt or an address the borrower has subsequently designated with notice by certified mail to the lender. It is generally a best practice to provide notice by regular and certified mail to all known addresses for every borrower. It is not required that the borrower (mortgagor) actually receive the notice, only that it be sent in compliance with the statute. The notice must be postmarked and provided to the defaulting borrower no later than 15 days prior to the date of proposed sale.
Prior to the sale taking place the lender must have published the scheduled foreclosure sale in the legal organ for the county in which the real property collateral is located for four (4) consecutive weeks immediately preceding the first Tuesday of the month (sale day). The notice of sale must contain the date, time and place of sale along with a description of the property, the names of the mortgagee and mortgagor and a reference to the power of sale provision.
There are 159 counties in Georgia and each county has a designated legal organ (newspaper), which publish foreclosure advertisements a minimum of once per week. Each county, therefore, will have its own independent publication deadlines that must be met for a sale to occur in a particular month.
In Georgia foreclosure sales are not randomly set. They always occur on the first Tuesday in every month on the courthouse steps of the particular county. Exceptions are made for certain legal holidays that may fall on the first Tuesday. The sale must be conducted between 10:00 a.m. and 4:00 p.m. or it is an improper use of the power of sale. Sales are generally conducted by the foreclosing attorney, and the foreclosing attorney is permitted to credit bid at the sale on the lender’s behalf. Successful bidders are required to tender the full amount of their bid in cash or certified funds immediately upon the conclusion of the sale, except if foreclosing lender is the successful bidder. Should a sale be postponed, terminated or voided, the entire foreclosure process must be repeated.
Once the sale occurs, the foreclosing attorney prepares and issues to the successful purchaser (most often the lender) a Deed Under Power of Sale which gets recorded in the land records of the particular county in which the property is located. Once a sale is concluded on the courthouse steps, there is no right to redeem given to the defaulting borrower (mortgagor). Georgia law gives a lender the ability to rescind a foreclosure sale under certain circumstances within 30 days of the sale, so long as title has not already been transferred to the successful purchaser.
A foreclosure sale will sever and extinguish any lien junior or subordinate to the one being foreclosed, with one notable exception. Foreclosure alone does not automatically extinguish a federal tax lien, which will stand as a lien against the property unless prior notice has been given to the IRS. The notice must have been given more than 25 days prior to the foreclosure sale and the IRS must fail to take any action within 120 days after the foreclosure sale to protect its interest in order to extinguish the lien with respect to the security.
In situations where the foreclosure sale does not produce enough cash to pay the loan balance in full (after deducting expenses and accrued unpaid interest), the lender may elect to obtain a personal judgment against the borrower for the unpaid balance. This deficiency process in Georgia is accomplished through confirmation of the foreclosure sale. For the foreclosure sale to be confirmed, an application must be brought to the Superior Court in the county in which the sale occurred within 30 days of the sale, otherwise the right to pursue a deficiency is lost. This is a judicial process. As part of the confirmation process the Judge will generally examine how the sale was conducted to determine whether the property was sold for its fair market value. The lender must enter a minimum bid equal to at least the fair market value of the property for the sale to be confirmed.
As an alternative to foreclosure, a lender may accept a deed in lieu of foreclosure from the borrower. These are very rare in Georgia because the non-judicial foreclosure process can often be accomplished as quickly as obtaining a deed in lieu of foreclosure with the added benefit of having all junior liens eliminated. Another popular alternative to foreclosure in Georgia is the loan forbearance or modification.
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