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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