May 22, 2019

Georgia Supreme Court Rules in Favor of Mortgage Lenders Over Homeowners in Important Decision

A 2017 ruling by the Georgia Supreme Court most likely represents a significant weakening to a consumer protection provision contained in Georgia’s home foreclosure law.

Georgia law allows what is known as a non-judicial foreclosure. This means that if you fall behind on your mortgage payments, your mortgage company does not have to go to court to seize possession of your home.

Instead, buried deep in the fine print of your mortgage paperwork is language that allows your lender to foreclose on your property simply by giving you written notice and thereafter advertising a foreclosure sale in the legal newspaper of the county where the property is located.

In Georgia, a lender can seize your house in less than 40 days if you are in default. Compare this to a home foreclosure process that typically lasts a year in a judicial foreclosure state like Florida. [Read more…]

How Does Foreclosure Law Work in Georgia


non-judicial foreclosure + GeorgiaThe Atlanta newspaper recently published an article reporting that over 40% of homes in the metro Atlanta area are “underwater,” meaning that they are worth less than what is owed.  In such a climate, homeowners faced with years of payments on real estate with no chance for even a break even sale, much less profit are deciding to simply walk away.

Abandoned homes, of course, cause neighborhood values to decline even more, continuing the downward cycle.   Presumably, at some point property values will level off but it may take years, if ever, for values to rise to pre-2008 levels.

In years past, mortgage lenders would act quickly to secure their rights by initiating foreclosure proceedings against homeowners who defaulted on their loans.   We have seen far less foreclosure action in the metro Atlanta area over the past few years because lenders are worried about potential liability arising from procedural irregularities (the “robo-signing” problems) and because the federal government has put a great deal of pressure on the big mortgage companies not to foreclosure during a bad recession.

Because foreclosure activity has been restricted, real estate markets in large metro areas like Atlanta have stagnated.   Thousands of homes remain in limbo – payments are not being made but foreclosures are not being processed.  Towards the end of 2012 and on-going, however, we are starting to see an uptick in foreclosure activity.

Demand for housing is increasing, especially for homes in the $75,000 to $150,000 range and lenders want to clear out their inventory.   Foreclosure numbers are trending upwards and will likely to continue to do so.  As such, it may be helpful to you to  understand a bit more about how foreclosure law in Georgia works.

Foreclosure law in Georgia is governed under Georgia Code Section44 Title 14. These laws are very specific about notifications to borrowers, deficiency judgments and rights of redemption. 1

No Requirement for Court Involvement in Georgia

Georgia is considered a title theory state, which means that the mortgage lender actually holds the title to a property until such time as the borrower has paid his debt in full.  Mortgages in Georgia almost always contain a power of attorney clause which says that in the event of default, the borrower (you) authorizes the lender to sell the property at public sale in the event of default.  Again, no court involvement is required but lenders are required to provide notification of the foreclosure sale to the borrower.

There are two steps required for notification:

First, the lender must send you a written demand notice outlining all past due amounts allowing the borrower 10 days to pay in full. If the borrower does make this payment, the lender cannot assess any foreclosure fees.

The second step is a foreclosure schedule notification which must be published for at least four consecutive weeks in the local newspaper. In addition, the borrower must be re-notified within 15 days of the sale via certified mail.

Once the notification requirements are met, a foreclosure sale must only take place on the first Tuesday of the month at the courthouse steps of the county where the property is located.  If you were to visit your local county courthouse on foreclosure Tuesday you will see mortgage company lawyers auctioning off property to the general public.

In many foreclosure sales, however, the only bidder for the property is the foreclosing mortgage company.  This is because a third party purchaser or investor would have to satisfy the outstanding first mortgage before taking title.   If the first mortgage debt on the property is greater than the value, a buyer would have to pay more than the property is worth to take title – obviously no one will do this, so in underwater mortgages, the lender “bids in” an offer equal to the outstanding principal balance.

Deficiency Claims

If the lender “buys” the property for the outstanding first mortgage balance, that lender can pursue a deficiency claim against the borrower.  However, under Georgia law (O.C.G.A. Section 44-14-161(a) the only way a lender can pursue a deficiency judgment is to file a lawsuit in Superior Court asking a judge to confirm the deficiency.  This “confirmation” basically means that the superior court judge agrees that the lender’s assertion about fair market value is legitimate and that the lender’s calculations about its outstanding balance are accurate.

A confirmation judgment is a very serious problem for the borrower/former homeowner.  Once this judgment is issued, the former homeowner’s assets area at risk, his bank account is subject to levy and his paycheck is subject to wage garnishment.

If have received a notice of foreclosure out any deficiency claim along with the rest of your unsecured debt., it would be wise to talk to a lawyer about your options.  Ginsberg Law Offices is a bankruptcy law firm and we can counsel you about Chapter 13 – which you could use to stop the foreclosure, and Chapter 7 – which you could use to wipe.

We can also answer your questions about timing and non-bankruptcy options.   We can be reached at 770-393-4985 and we are standing by to answer your questions.

  1. The Georgia Attorney General’s web site contains an easy to read summary setting out the rules for foreclosure in Georgia.  You can visit the Attorney General’s site here.

Middle Class Debtors Often Victims of Falsehoods and Misrepresentations

Man shoutingLast week, a former client called and tried to refer me a new Chapter 13 client who was facing foreclosure.  While I appreciated the referral, I could not take the case because the potential client was calling from out of town at 5pm on the Monday before his house was schedule to be sold at a foreclosure sale on the courthouse steps.  The potential client did not have a credit counseling certificate and because he had filed before twice, the automatic stay would not go into effect even if he did file.

During our conversation, the potential client told me that he had been negotiating with his mortgage company and that until that Friday, he was led to believe that a modification and restructuring of his loan was likely.

I hear the same story from vehicle owners who have fallen behind by two or more payments but who are talking to the customer service reps at their lenders.  I remember one case involving a woman who had never had any credit problems before but was struggling to pay her car note because of a job layoff. [Read more…]

Home Foreclosed? Here’s What Happens Next

official notice of mortgage foreclosureGeorgia foreclosure law allows lenders to start and complete the mortgage foreclosure process in as little as 37 days.  This means that just over a month from the start date of the foreclosure, you may lose all title interest in your home.

With very limited exception, lenders in Georgia do not have to go to court to foreclose on your home.  Georgia law permits non-judicial foreclosure, which means that if you go into default, the mortgage company or bank needs only to send you a written notice of intent to foreclosure, then advertise the pending sale for four (4) weeks in the legal newspaper for the county where the property is located.

By contrast, other states like Florida, Illinois and Ohio use a judicial foreclosure procedure where the lender must file a lawsuit against you, win a judgment allowing for a foreclosure then conduct the sale.  In these other states, a title transfer might not happen for 8 months to a year.

Foreclosure sales in Georgia are conducted on the courthouse steps of the county where the property is located.  These sales occur only on the first Tuesday of each calendar month and consist of live auctions conducted by mortgage company lawyers. [Read more…]

Georgia Homeowners Should Not Assume that Mortgage Lenders will Negotiate in Good Faith

dual tracking foreclosureThe Atlanta newspaper ran a story this weekend about a Mableton woman who found herself facing an eviction notice following a foreclosure even though her mortgage loan account had been accepted into Georgia’s HomeSafe program.

The HomeSafe program is a federally funded and state run arrangement whereby unemployed or underemployed borrowers can get a 0% interest bridge loan. The bridge loan funds are then paid to the mortgage lender to stop the pending foreclosure.

In the Mableton woman’s case, her lender, Citibank, should not have foreclosed because it agreed to participate in the HomeSafe program.  In this case, after inquiries by the newspaper, Citibank has agreed to cancel the eviction and presumably reverse the foreclosure.  However, Citibank insists that it did nothing wrong because it was acting on behalf of the loan’s actual owner, Freddie Mac.

The AJC notes that the Mableton woman’s case is another example of something called dual tracking, in which a lender prepares to foreclose while at the same time engages in negotiating with the homeowner for a loan modification or forbearance.  The homeowner often believes that a modification is imminent and that the foreclosure will be canceled, only to find out two or three days before the foreclosure that there is no deal.

[Read more…]

Are You Liable for Ongoing Homeowner’s Association Dues if You Surrender Your House in a Bankruptcy?

HOA lawsuitEarlier this month on my Atlanta-bankruptcy web site blog I discussed an interesting case involving mortgage loan deficiency claims that was issued by the Georgia Court of Appeals and Georgia Supreme Court.  In the River Farm vs. Suntrust case, the Georgia courts ruled that a mortgage lender could sue a defaulted borrower on the promissory note and thereby bypass the deficiency confirmation process associated with a foreclosure.  This ruling is important because property values in Georgia have been trending downward and more and more often I am seeing cases where the balance due on a mortgage exceeds the fair market value of my client’s home.

This court case should be of concern to you if you intend to walk away from your home because you are delinquent or if your are so “underwater” with your mortgage that it does not make sense to fight to keep a home that may never be worth what is owed on it.   If you do walk away (without filing bankruptcy), your lender may sue you on the mortgage loan contract instead of foreclosing.  The lender would refrain from foreclosing to avoid a legal requirement associated with foreclosure that would require the lender to appear before a judge to argue that the foreclosure sale price was reasonable.

In my article, I pointed out that this change in the law might encourage more people to file bankruptcies since a bankruptcy can discharge any deficiency claim.

However, there is another potential problem area that could arise if your lender holds off on foreclosing.  This problem area relates to homeowners’ association (HOA) dues.

Under Georgia law, homeowners’ associations enjoy special protections.  Unpaid dues can automatically can become liens that encumber your property.   As HOA lawyers read the law, if you file a bankruptcy and surrender your home, your delinquent HOA dues as of the date of filing will be discharged.  However, ongoing dues that accrue after the filing remain your obligation until title passes.  In other words, if your HOA dues are $100 per month and you file Chapter 7 bankruptcy on February 28, your dues begin accruing again on March 1.  If your lender does not foreclose until November, you would, in theory, be responsible for 8 months of dues, or $800, after your filing, even though you have stated  your intention to surrender your house in bankruptcy. [Read more…]

Can You Rely on a Verbal Promise that Your Foreclosure Will be Delayed?

Notice of ForeclosureLast month, I met several times with a potential Chapter 13 client who was facing a mortgage foreclosure.  Over the course of the past few months he has been juggling his creditors and bills trying to stay afloat and during that time he fell behind to his mortgage company by more than four months, and found himself in the foreclosure process.

This individual earns over $100,000 annually, but, unfortunately he used to earn more than double this amount.  His problem was not the mortgage, but his other bills, including a very high car payment and a mortgage payment arising from a failing real estate investment.

Not surprisingly the foreclosure notice got his attention.  He immediately took action by calling me to discuss Chapter 13 bankruptcy and by contacting his mortgage company to discuss repayment options.   By the Wednesday prior to the pending foreclosure sale scheduled for the following Tuesday, my client had provided me with enough information so that I could prepare a rough draft of a Chapter 13.   In this case, by the way, my client and I entered into an agreement whereby he paid me around $300 to open a file and to start entering information into my petition preparation program.

On the pre-foreclosure Wednesday he called to say that after a lot of discussion he was expecting a decision the next day from his mortgage company but that if he did not hear from them by mid-day on Thursday, we would be proceeding with the Chapter 13.  A few hours later he called back to say that his mortgage company had agreed to postpone the foreclosure until September and that the Chapter 13 was on hold for now. [Read more…]

Should You Save Your Home from Foreclosure, or Should You Let it Go

With the news full of foreclosure statistics showing huge increases along with stories of self-righteous Members of Congress asserting their heartfelt concern for “struggling homeowners” little attention is paid to the question of whether a homeowner ought to fight to save his home.  My friend and colleague, Charleston bankruptcy lawyer Russ DeMott were recently discussing this issue and I invited him to prepare a guest post about this very topic:

Chapter 13 bankruptcy is a tool that can be used to save your home from foreclosure.  But the big question sometimes isn’t “can I save my home,” but “should I save it?”

We all know that there’s been an epidemic of foreclosure resulting from the recent economic downturn.  Jobs were lost, values plummeted, and foreclosures have been on the rise.

So it’s natural to wonder, “can I file Chapter 13 bankruptcy to save my home from foreclosure?”  However, when you meet with a bankruptcy lawyer to explore your options, you need to explore all your options—bankruptcy and otherwise.  And that might be not saving your home.

When you’re having financial problems and seek advice, you should take the opportunity to review your entire financial situation.  Can you afford your vehicle payments? Can you “tighten the belt” and cut back on some unnecessary expenses?  And most significantly, “should you try to save your home?”

In my Charleston, South Carolina bankruptcy practice, I get calls every week from folks facing foreclosure.  The potential bankruptcy client’s question is always a “can we?”  Can we stop foreclosure?  Can we make the lender listen?  Can we catch up on these payments we’ve missed?  Can we protect our home? Can Chapter 13 bankruptcy help?

[Read more…]

Missed Mortgage Payments in Your Chapter 13 – An Expensive Problem

In the Northern District of Georgia, the “standard” Chapter 13 plan that is used provides that on-going mortgage payments are to be made directly to the mortgage company during the pendency of your Chapter 13 plan.  In other words, if you file Chapter 13 because you are three payments delinquent, your missed payments (the mortgage “arrearage”) will be paid in your plan.  However your ongoing mortgage payments are sent directly to the mortgage company.

I know that in some bankruptcy filing districts, on-going payments are collected by the trustee and paid through the trustee’s office.   The trustees in the Northern District of Georgia do not do this as a matter of course.

This means, therefore that Chapter 13 debtors have the significant responsibility for paying their mortgage payments on time each month after their cases are filed.  If you miss one or two payments, the mortgage lender can and will file a Motion for Relief from Stay.  They will argue that your missed payments reflect your inability to afford your mortgage and that bankruptcy protection ought to be lifted so that the mortgage lender can foreclose. [Read more…]

Honest Renters Get Caught in Foreclosure Disasters

This past Sunday, the AJC published a fascinating article entitled “Foreclosures Reach Renters.”  The article reports on several very sad cases in which a hardworking rental home tenant finds himself literally out on the street following the foreclosure of his rental home and an eviction filed by the new owner (usually a mortgage lender eager to put the foreclosure property back on the market).

Georgia, as you may know is a “non-judicial foreclosure” state, meaning that in the event of a default in payments, a lender does not have to go to court to retake his property.  Instead, the lender need only give notice of the pending foreclosure to the homeowner, then advertise for four consecutive weeks the foreclosure sale in the official newspaper of the county where the property is located.  Then the lender’s attorney can sell the property at open auction on the first Tuesday of the following month.  In a worst case scenario, a foreclosure in Georgia can be completed in as little as 45 days.

Eviction, too, is not forgiving.  Georgia law offers no safe haven or notice period for a tenant who discovers too late that his rental payments were ending up in the pocket of his landlord, rather than as payments to a mortgage company.

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