Skilled Help Understanding And Navigating Foreclosures In Georgia
When debtors fall behind on mortgage payments, lenders are left with few options other than foreclosure in an effort to minimize their losses. While foreclosure proceedings are less than ideal for debtors, the process is not without its cons for lenders either. In Georgia, foreclosure proceedings can be complex and require timely action that needs to be handled precisely to avoid legal issues later. In such cases, seeking representation from a skilled lawyer is not only advised, it’s often necessary as well.
At Jones & Walden LLC, we pride ourselves on our ability to represent debtors and creditors in foreclosure proceedings throughout Atlanta and surrounding areas in Georgia. Our capability to handle foreclosures from either side means we can see the entire matter, which allows us to more effectively resolve issues before they result in costly litigation. Our diverse backgrounds in various areas of law are also an incredible benefit to our clients who may require more sophisticated counsel to address more complex issues.
Understanding Foreclosure In Georgia
Georgia is a “nonjudicial” foreclosure state. This means a foreclosure can be initiated and completed by a lender without intervention by the court if the loan documents allow it. Nonjudicial foreclosure sales involve the following issues and requirements:
A Deed To Secure Debt
A deed to secure debt, also known as a security deed, is executed by the borrower in the initial loan transaction. The security deed should contain a power of sale clause that permits the lender to accelerate the entire balance of the loan upon default and proceed with a nonjudicial foreclosure sale of the property.
Notice Of Default
Georgia law requires lenders to provide notice of a foreclosure at least 30 days before the date of the foreclosure sale. The notice must be in writing and sent to the borrower by certified mail or statutory overnight delivery. The lender only needs to prove that the notice was properly delivered to the borrower’s last known address; the law does not require proof that the borrower actually received the notice.
Some loan documents may require additional notice procedures that must be followed as well. In order to either conduct or contest a foreclosure, a careful review of all loan documents is essential.
Statutory Attorney’s Fees
Both the loan documents and applicable Georgia law control whether a lender may collect statutory attorney’s fees. Under the applicable Georgia statute, a lender may collect attorney’s fees up to 15 percent of the outstanding principal and interest owing upon default if the loan documents expressly allow it. If the loan documents only provide for “reasonable attorney’s fees,” however, the lender’s attorney’s fees are limited to 15 percent of the first $500 owed, plus 10 percent of any additional principal and interest owed over $500.
Alternatively, the debt documents may provide for recovery of the actual attorney’s fees incurred by the creditor, but they will likely be limited to a “reasonable” amount by the court. In order to enforce the attorney’s fees provision in the debt documents, the lender must provide written notice to the debtor that he or she can pay the entire debt amount within 10 days of the notice to avoid the addition of attorney’s fees. The notice must be sent via certified mail or statutory overnight delivery.
A notice of sale must be published in the official newspaper (known as the “legal organ”) for the county in which the property is located. The notice must run in the newspaper at least once a week for four consecutive weeks immediately preceding the foreclosure sale. The notice must contain certain information such as the borrower’s name, a legal description of the property, information concerning the original deed to secure debt and the name of the party who currently holds the deed to secure debt. A copy of the notice of sale must also be sent to the borrower at least 30 days before the foreclosure sale date.
The Foreclosure Sale
The actual foreclosure sale is conducted on the first Tuesday of each month between 10 a.m. and 4 p.m. The sale is held on the courthouse steps of the county where the property is located and is open to all bidders. The foreclosing lender may bid at the sale (known as a “credit bid”) by crediting and thereby reducing the amount of the debt due. If the foreclosing lender’s bid is the highest or only bid, the lender will take title to the property and reduce the debt balance by the amount of the credit bid. Third-party bidders may attend the sale to bid, but must have their full bid amount ready in cash or certified funds. Following the auction and sale, the foreclosure is completed by recording a foreclosure deed known as a “deed under power of sale.” If the lender wishes to preserve a claim for any balance owed after the foreclosure sale, the lender must bid the fair market value of the property and “confirm” the sale as detailed below.
Effect Of Foreclosure Sale
The foreclosure sale extinguishes all inferior liens, security deeds and encumbrances, except for any ad valorem property taxes. “Inferior” in this context means that the lien is subordinate to another lien, generally because it was recorded later in time.
Careful attention must be given, however, to any inferior tax liens. To extinguish an inferior federal tax lien, written notice must be given to the IRS at least 25 days prior to the foreclosure sale. Superior liens (i.e., those recorded before the foreclosing lender’s deed to secure debt) are not adversely affected by the foreclosure sale. A successful bidder at a foreclosure sale will thus take title subject to any superior liens.
Confirmation Of A Foreclosure Sale
Following a foreclosure sale of real estate in Georgia, a lender may not collect a deficiency balance from the borrower unless the lender sells the property for its fair market value and “confirms” the sale. The deficiency balance is the difference between the amount of debt and the sale price at foreclosure.
The confirmation process in Georgia is a Depression-era statute peculiar to this state. If the lender confirms the foreclosure sale in accordance with Georgia law, it can pursue the borrower to recover the deficiency balance owed on the loan. The requirements of confirmation are as follows:
- The lender must file a petition to confirm the sale against the borrower within 30 days of the foreclosure sale. To file the petition, the lender must actually present the petition to the judge of the Superior Court in the county where the real estate is located.
- The lender must serve a copy of the petition and a notice of hearing on the borrower. The borrower must receive at least five days’ notice of the hearing.
- The court will hold a hearing to determine whether the foreclosure sale was advertised and conducted in accordance with Georgia law. The court must also ensure that the lender sold the property for at least its fair market value. For this reason, any lender considering seeking a deficiency balance should obtain a written appraisal of the property prior to the foreclosure sale and credit bid or sell the property for no less than the appraised amount.
Compliance with these requirements preserves the lender’s right to sue and collect the deficiency balance from the borrower and any guarantors. If the court finds that the lender did not obtain fair market value or did not follow appropriate foreclosure procedures, then the court may deny confirmation or authorize a second foreclosure sale.
Recent decisions by Georgia’s appellate courts indicate that lenders may collect deficiencies from guarantors, even absent a confirmation of the foreclosure sale, where the guarantors have waived certain defenses in the guaranty.
Let Our Capable Team Manage Foreclosure Proceedings
Navigating the complexities of foreclosure proceedings in Georgia is not lost on our team of highly experienced and skilled lawyers. We pride ourselves on having extensive foreclosure experience and offering the same diverse range of services that large firms do while also being able to provide the one-on-one attention expected from a small firm.
If you’re a creditor or debtor in Georgia and are interested in retaining our services to help you through foreclosure proceedings, we encourage you to call our Atlanta office at 678-701-9235 or contact us online to schedule a consultation.