Although under Georgia foreclosure laws, both judicial and nonjudicial foreclosures are permitted, Georgia is considered a nonjudicial foreclosure state, so most foreclosures take place outside of court after a homeowner has defaulted on their mortgage loan and the Georgia pre-foreclosure process has been completed. The Georgia foreclosure process has historically been one of the fastest in the country, but more recently Georgia foreclosure timelines have been closer to 90 days.
According to the Georgia Office of the Attorney General, Georgia foreclosure laws require only 30 days’ notice to the delinquent homeowner prior to the foreclosure sale. Lenders must include the name, address, and phone number of an individual with the authority to negotiate, amend, and modify the terms of the mortgage and send the notice by registered or certified mail. Additionally, the mortgage holder must publish notice of the foreclosure prior to the foreclosure.
As in most other states, federal law discourages the initiation of foreclosure proceedings in Georgia until the borrower has fallen 120 days past due on their mortgage loan payments. Although this period of time is not officially part of the pre-foreclosure process, real estate investors should consider it an essential part of investment strategy because many homeowners in this stage feel they have entered “pre-foreclosure” and may be considering selling their properties.
A court foreclosure in Georgia occurs when there are title problems or the mortgage or trust deed lacks a clause permitting an out-of-court proceeding. The process begins when a lender files a petition describing the situation, the property, and the default amount. The borrower then receives a 30-day written notice in which the default must be paid to the court. If the default is not resolved, a foreclosure sale is scheduled.
The out-of-court process is more common, as most Georgia mortgages and trust deeds contain a clause giving a lender the power to sell the property outside of the court system. The lender starts the foreclosure process by scheduling a foreclosure sale and notifying the borrower via a series of specific steps involving mail correspondence and public announcements of the foreclosure sale.
If the mortgage or deed of trust allows, the borrower can stop the foreclosure by paying off the default amount plus applicable costs, but Georgia state law does not automatically give this reinstatement right to the borrower. The borrower may also stop the foreclosure by paying the total loan balance.
A notice of sale is published once a week for the four weeks before the sale. This notice is also sent to the borrower a minimum of 30 days before the sale date. The notice must include the date, time, and location of the sale; a description of the property; mortgage information; and the lender and borrower names.
Georgia foreclosure sales take place at the county courthouse on the first Tuesday of the month between 10:00 a.m. and 4:00 p.m. In 2020, the COVID-19 pandemic caused many of these sales to be postponed indefinitely, so public health policy and financial policies, such as foreclosure moratoriums or state-mandated forbearance, may change the foreclosure timelines. The winning bidder, if other than the lender, is required to pay the full bid amount to the person conducting the sale immediately following the sale. If a foreclosure sale is canceled, the lender may have to begin part or all of the Georgia foreclosure process again.
Georgia foreclosure laws permit lenders to seek deficiency judgments if the foreclosure sale price of a property is less than the property’s current fair market value (FMV). After a hearing, the court will either verify that the foreclosure sale price was at least as much as the property’s FMV or will verify that the price was lower than FMV. In the latter event, the lender can file a lawsuit for a deficiency judgment. However, these hearings also involve a second round of examinations of the lender’s foreclosure procedures. If the lender did not follow the Georgia foreclosure process, then the court may order a resale of the property.
Georgia foreclosure laws do not allow for the right of redemption after foreclosure, so homeowners cannot redeem their foreclosed property after the foreclosure sale.
In Georgia, a valid foreclosure wipes out the borrower’s right to live in the property and the new owner can file a dispossessory action to evict the former homeowner from the home. In some cases, investors who buy Georgia foreclosures may offer “cash for keys” to help former homeowners with moving costs and to expedite their exit from the property. However, if a real estate investor buys a Georgia foreclosure with a tenant holding a bona fide lease still living in the property, that tenant must be given 90 days’ notice, at minimum, to move out. However, if that tenant is related to the borrower or is the former homeowner, the statute does not apply.
On July 12, 2012, the Georgia Court of Appeals, by a 4-3 majority, ruled in the case Reese v. Provident Funding Associates that notices of foreclosure must include the true identity of the “secured creditor.” The Court of Appeals defined “secured creditor” to mean the “owner of the loan,” not the servicer. This constitutes a new foreclosure requirement under Georgia law that will significantly impact the ability of creditors to enforce their liens, and it has the potential to invalidate foreclosures that do not meet this requirement.
This meant that lenders seeking to foreclose on a home must provide better disclosure on who owns the mortgage and list the contact information for people who can negotiate with borrowers under the 2012 Georgia Court of Appeals ruling.
On May 20, 2013, the Supreme Court of Georgia vacated the decision of the Court of Appeals in Reese v. Provident Funding Associates. In You v. JP Morgan Chase Bank, the U.S. District Court for the Northern District of Georgia acknowledged that there was a split of authority in Georgia as to whether the holder of a security deed who did not also hold the note could institute non-judicial foreclosure proceedings. This case effectively overturned Reese in its entirety.
The Court held that the foreclosing party did not need to own or have possession of the note along with the security deed. The security deed was sufficient to foreclose. Additionally, the Court went one step further and held that the required 30-day notice did not need to identify the secured creditor. It only needed to include identification information of a party that had authority to negotiate on behalf of a lender.
The ruling effectively dismantled the technical requirement that Reese set forth. To lenders this ruling gives certainty and will reduce litigation. As to borrowers, consumer advocates will argue that this ruling leaves the foreclosure process, especially who owns the loan, unchecked.
In December 2020, Georgia appeared to be poised to permit the CDC’s pandemic-related eviction moratoriums to expire at the end of the year without extending foreclosure forbearance or eviction moratoriums at a state level. The state’s historical reticence to interfere with foreclosure and eviction processes could mean that the state experiences an early wave of foreclosures when these types of policies are lifted at the federal level.
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