Georgia Latest State to Pass Legislation Changing the Foreclosure Process

by Deborah Y. Chandler, McCurdy & Candler, L.L.C.

The non-judicial foreclosure process in Georgia has remained relatively unchanged – until now.  In light of the crisis in the mortgage industry, court decisions regarding the identity of the “true” owner of the loan and closer scrutiny of loss mitigation efforts, Georgia legislature recently ratified SB 531 which lays out significant changes to the foreclosure requirements.  While we do not know exactly when this new law will become effective, we do expect Governor Perdue to sign the bill into law soon.  In fact, we suspect the effective date could be as early as July 1, 2008, which may cause delays in initiating foreclosures while servicers adjust their loss mitigation procedures to comply with one of the new requirements. There are two significant changes to the foreclosure process under this legislation:  (1) the requirement of stating a contact name at the servicer or lender and (2) the requirement that assignments be filed prior to the foreclosure sale.  The only other substantive procedural change requires that notice of the foreclosure must be given at least 30 days prior to the sale, increasing the number of days from 15 days prior to the sale.

The change with the most impact to the servicers is that the “name, address and telephone number of the individual or entity who shall have full authority to negotiate, amend or modify all terms of the mortgage with the debtor” will be required to be listed in the notices that the law firms send to the borrowers in connection with the foreclosure process.  This requirement relates to the statutory “Notice of Foreclosure” that must be sent to the debtor in advance of the foreclosure sale date.  Consequently, law firms conducting non-judicial foreclosures will need this specific information in order to properly initiate the foreclosure process. It is important to note that this provision is not forcing the servicer to actually amend or modify the terms of the loan, but to at least provide direct contact information that the borrower can use.  We see this requirement as an issue to our clients in several respects. 

First, servicers who do not have a loss mitigation number currently setup for use by anyone other than their law firms to directly contact them will need to establish that number and advise their loss mitigation department that they may start receiving calls directly from the borrowers.  Secondly, the increased visibility of the contact information in the letters may add to the voluminous number of borrower calls that the servicers are getting already as a result of their own loss mitigation awareness initiatives.  Finally, servicers will need to coordinate changing approval authority with their investors who have provided either limited or no authority to negotiate, amend or modify the terms of the loan with the borrower. 

For our clients who have preferred in the past for the borrowers to contact our firm and not the client directly for assistance with obtaining reinstatement or payoff quotes or discussing loss mitigation alternatives (which results in either a hot or cold transfer to the client’s loss mitigation department), we will continue to provide the following as a supplement along with the notice to the borrower:

1. Loss mitigation information packets that have been requested by our clients to include in any letters we send to the borrowers
2. A general description of possible loss mitigation alternatives and strong encouragement to the borrower to contact our firm using our toll free loss mitigation number for assistance

The other significant change established by the legislation is an additional requirement to the foreclosure process regarding assignments.  An assignment into the foreclosing entity must be “filed prior to the time of sale in the office of the Clerk of the Superior Court of the county in which the real property is located” if the foreclosing entity is different from the secured creditor of record.  “Filed” does not mean that the assignment has to be recorded and of public record prior to the foreclosure sale date.  We will be modifying our internal procedures to have the assignment sent out via overnight mail at least 2 days prior to the targeted sale date.  Consequently, in order to proceed with the scheduled foreclosure sale, all assignments to be filed must be sent to the county recording offices in advance of the sale date.  Many of our clients already require that the requisite assignment be received by us prior to the sale date before they will provide a bid or approve the sale to go forward, but for those who send the assignment after the sale to be recorded with the foreclosure deed, the procedures will need to be modified.  If we do not receive the assignment timely, we will have to reset the sale date. 

To minimize the impact of the assignment requirement to the foreclosure timelines and considering how quick the actual foreclosure process is in Georgia, timely receipt of needed assignments, whether intervening or into the foreclosing entity is more important than ever.  Therefore, we strongly urge our clients who want us to request the original executed assignment from them first and then wait several days prior to us being able to draft and submit the assignment to them for execution when the original cannot be located to modify their current process in one of the following ways:

1. Reduce the time we need to wait prior to drafting the assignment;
   
2. Give us approval to draft the assignment and send or upload to the client’s system at the time the initial request for the original assignment is made; or
   
3. Eliminate the need for us to request the original assignment first (for assignments into the foreclosing entity only) and allow us to immediately draft and send/upload the assignment for execution

We recognize that each of our clients is different with respect to their internal original document process, especially as to assignments.  We invite you to contact us to discuss these options in more detail as to which may be your best option and how we can efficiently coordinate our efforts, based on our past experience with the client as to obtaining assignments.

The last change to the foreclosure process extends the time period for the notice of foreclosure to be sent to the borrower.  Currently the foreclosure notice must be sent to the borrower at least 15 days prior to the sale date.  With SB 531, this notice must be sent at least “30 days before the date of the proposed foreclosure.”  This change will only affect the law firms and the format and content for the letters to the borrower. 

The new law’s impact on time lines is still being analyzed.  The firm’s ability to “roll” or “reset” a sale date will be governed by the new notice period requirements, not just the publication restrictions.  These situations most typically arise when a client wants us to postpone and reset the foreclosure for the next sale date in order to give the client more time to work out a loss mitigation proposal with a borrower.  With this new notice time period, we may not be able to set the new sale date to the very next month – it may end up having to be reset as far out as 2 months since foreclosure sale day is always the first Tuesday of every month.

Our firm is monitoring this legislation closely and we will provide updates to the status, effective date and impact as they occur. For your reference, click here for a PDF copy of the latest version of SB 531. If you have any questions about this legislation, what we are doing internally to accommodate the changes or need advice as to what changes you as the servicer need to make to comply and still maintain time lines, please contact either Michael Dugan, Esq., at mdugan@mccurdycandler.com (678-891-1837) or Deborah Chandler, Esq., at dchandler@mccurdycandler.com (678-891-1838 or 404-200-2313).