What Comes After the NOD?

Many of my blog readers have asked why the Georgia foreclosure process happens so fast. The only answer I have is...because our state law is set up that way -- to favor the lender, not the borrower. That's why it is so imperative that Georgians contact their lender and an experienced real estate professional as soon as they begin having trouble making their mortgage payments.

The Georgia foreclosure process begins when the homeowner fails to make payments of the money due on the mortgage at the appointed time. Proceedings typically start with a formal demand for payment which is usually a letter issued from the lender. This letter of notice is referred to as a Notice of Default (NOD). In Georgia, the lender will issue this notice when the homeowner has been 30 days or more delinquent on the mortgage payments. 

Every Georgia mortgage holder needs to understand that the Notice of Default is a threat to sell your property, terminate all your rights in the property and evict you from the premises.

In Georgia, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process. Judicial , or in-court, proceedings are not common, but an out-of-court, non-judicial foreclosure in Georgia can be completed in less than two months.  The process period may be a short as 37 days, with the sale publication occurring in 32 days. Also -- and this is very important -- there is no right of redemption, therefore no redemption period in the state of Georgia. Here is what you need to know about both types:

Foreclosure by judicial saleis available in every state and is the required method in many. Unfortunately, Gerogia is not one of these. I say "unfortunately" because, in a judicial foreclosure, the homeowner has more time and more recourse to resolve his situation and possibly save his or h home. First, a lawsuit must be filed by the lender to obtain a legal order to foreclose. All parties must be notified of the foreclosure, and then there will be a hearing or trial. The homeowner has an opportunity to plead his case before a judicial decision is made. Generally, if the court declares a foreclosure, the property will be sold or auctioned under the supervision of a court, with the proceeds going first to satisfy the mortgage, and then to satisfy other lien holders, and finally if anything is left it will be distributed to the mortgagor. 

The second type of foreclosure is non-judicial, or foreclosure by power of sale as we previously discussed, and is the type of foreclosure most prevalent in Georgia. This type of foreclosure involves the sale of the property by the mortgage holder without the supervision of a court of law. Lenders, of course, favor foreclosure by power of sale for it's expedience and cost-effectiveness. Again, proceeds from the sale go first to the mortgage holder, then to other lien holders including second place mortgagees, and finally to the mortgagor if there is anything left to disburse. 

Georgia Power of Sale Foreclosure Guidelines If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:

1. A foreclosure notice must be mailed by certified mail, return receipt requested to the borrower no later than 15 days prior to the date of the foreclosure sale. The time period begins the day the letter is postmarked. The notice must be mailed to the address given to the lender by written notice from the borrower. No waiver or release of the rights to notice is valid if it was signed at the same time as the original documents.
   
   The notice must be published in a newspaper of general circulation in the county where the sale will be held once a week for four (4) weeks proceeding the date of the foreclosure sale.
   
2. The sale must be made by public auction on the first Tuesday of the month between 10:00 am and 4:00 p.m. at the courthouse.

A third and lessor-known type of foreclosure may be negotiated when a borrower becomes unable to continue making mortgage payments. It's known as "voluntary foreclosure", a "deed in lieu of foreclosure," or "strict foreclosure". In this case, the borrower negotiates with the lender to "give back" the property back in full satisfaction of the debt. 

For more in-depth information and free reports on this and related subjects, visit http://AvoidGeorgiaForeclosure.com

Many of the comments posted on the last installment of this series expressed amazement concerning the lightening speed of some Georgia home foreclosures. Here are the main reasons:  

A Crash Course in Title Theory.  

Georgia is what's known as a Title Theory state, where the property title remains in the hands of the lender until the underlying loan is paid in full. When a person buys real estate in Georgia with funds borrowed from a lending organization or party, the resulting mortgage is established by two legal instruments: a promissory note or "promise to pay", and some type of title security document.  

The first of the two mortgage instruments is the note, which is considered to be a negotiable instrument that can be transferred to another person or agency to collect. In fact, mortgages often change hands more than once during the course of the loan.  

The second is the security instrument. The document that secures the title in Georgia is called a Deed to Secure Debtbut may also be referred to as a Security Deed. When you entered into such an agreement, you, the borrower, became the mortgagor, or person incurring debt in order to purchase real estate, and your lender became your mortgagee, the credit-extending agency. The mortgage creates a lien on the property in favor of the lender. In Georgia this usually takes the form of a security deed conveying title over the property to the lender, though the borrower retains all the usual rights of ownership  as long as the repayment terms are being met.   

What are Acceleration and Power of Sale?

Acceleration is a clause written into the mortgage which allows the mortgage-holder the right to declare the entire debt due and payable anytime a borrower defaults on their agreed payment schedule. Virtually all mortgages today have acceleration clauses. But Georgia mortgages usually go a step further. The security deed also contains a "power of sale" provision, which authorizes the lender to sell the property with no judicial process required in case of default.

What this all means for Georgia home buyers is that the lender keeps the title to the property until the terms of the lending agreement have been entirely fulfilled. Then the lender must clear title by canceling the security deed upon full payment of the debt. But, if the borrower does not adhere to the terms of repayment, the lender may foreclose on the property.  

To learn more about the process and the options, or to pick up a copy of my free eBook on the subject, visit http://AvoidGeorgiaForeclosure.com

A few weeks ago a member of my church called me with a panicked and tearful query. "How could this be happening to me? This letter says that my house will be going to auction in less than five weeks!!"

Like many other Georgians, the shrinking economy, rising cost of living and loss of employment has impacted her ability to continue meeting her monthly mortgage obligation. Now she is several months in arrears and has been denied a loan modification. Receiving the dreaded NOD (Notice of Default) was just about more than she could bear. 

"Can they really just take my home and kick me out? Don't I have any rights?"

Sadly, I had to inform her that indeed "they" could, and "no" she probably didn't.   Let me explain.  

What exactly is Foreclosure?  

Foreclosure is a legal procedure with far-reaching and long-lasting consequences. Legally speaking, foreclosure is a term meaning to shut out, to bar, to extinguish a mortgagor's (borrower's) right to possess real property. It is is the "equitable proceeding" in which a bank or other secured creditor sells or repossesses a parcel of real property due to the owner's failure to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust." Sadly, it is also a termination of all rights of the homeowner covered by a mortgage.  

By this process, a lender may indeed repossess a property when the borrower defaults on payments. It is one of the most frightening, embarassing and traumatic experiences an individual or family can endure. And the effect of foreclosure on a person's credit rating and ability to become a homeowner in the future are negative and long-lasting. A foreclosure remains a blight on the borrower's future ability to get a home loan. While other negative credit items may fall off an individual's credit report after 4 - 10 years, the one question that is asked on every mortgage application is "Have you ever had a foreclosure?"

Why Georgia Foreclosure is Particularly Traumatic. 

If you've followed this Facing Foreclosure blog series, you already know my feelings about the Georgia foreclosure process. It's fast and it's brutal. Unlike most other states, Georgia allows foreclosure to take place with no judicial oversight as long as a "power of sale" clause is included in the security document. It usually is.  

This means that "they" are not even required to file a lawsuit. As far as I know, no other state has a shorter foreclosure process. Although most lenders will wait until a borrower is several months behind in payments before initiating a foreclosure, once the process starts in Georgia, a house can be sold on the courthouse steps in as few as 37 days. Lenders, of course, prefer this method because it involves less time and expense for them than if they were required to file a lawsuit.  

But for unfortunate homeowners like my friend (now client), the Georgia foreclosure process can be devastating. Luckily we were able to get her property on the market for short sale and thereby stave off the foreclosure -- at least for the time being. Hopefully we will get an acceptable offer soon and she will be able to settle this mortgage debt with a "paid as agreed" short sale and avoid foreclosure.

Time is Truly of the Essence. 

Anyone facing a simlar challenge should act quickly to find out what your options are. Time is not your friend when you're facing foreclosure in Georgia. For more information on how this might work for you or someone you know, visit www.AvoidGeorgiaForeclosure.com.

While the understandabe first reaction to a notice of pending foreclosure may be panic and despair, don't linger there. Pull yourself together and see if there is any way to fight back.

These days, most lenders would rather work with you than foreclose on you. It's not quite altruism on their part -- rather, it's for their own benefit in most cases. Did you know that it can cost the lender more money to foreclose than to work it out? According to my research, lenders spend an average of $40,000 - $50,000 and sometimes much more in total expenses, fees and losses when they foreclose. In some cases they even have to fight it out in court before they can take your house tot he courthouse steps.

First ask for a Loan Modification. If they are unable to modify your loan to a monthly payment you can comfortably manage, ask for a Short Sale. In a short sale, you put your house on the market and get a purchase offer for fair market value, whatever that may be. You and your Realtor should then make a solid case to your lender as to why they should accept the offer as "payment as agreed" and release you from the former debt. This is a simplification of the process, of course. In reality, it can be a tricky transaction to navigate, but an experienced short sale specialist or distressed property expert can smooth the process, and assist you to a successful resolution. The Property gets sold, the lender nets more money, and you avoid foreclosure and get released from an unaffordable obligation.

Its a win-win situation for everyone involved. You get out from under your debt, and the lender saves money too. Consider the objectives of the lender. They want what's best for their bottom line, and that ususally is not another bank-owned property stting on the market, maybe even languishing there, losing value by the month. Foreclosure costs the lender in advertising, attorneys fees, maintenance, REALTOR fees, repairs, vandalism, etc. From the lender point of view, it might be better to delay the foreclosure and give you an opportunity to short sell. You'll never know unless you ask.

So start by talking to your lender. And then, if that fails to resolve your dilemma, don't just talk to any old agent. Call in a REALTOR who specializes in situations like yours.

Learn more about loan modifications and short sales in Georgia.

We know the threat of foreclosure can be emotionally debilitating. Yet now is not the time to cave in. Rather, now is the time for you to reach down into yourself and pull up that reserve of energy and resolve in order to fight back. If you've fallen behind on your mortgage, you don't have to just let the lender take your house. There is one strategy that is paramount in this situation. What is it? 

Talk to your lender.

This is the first and most important thing you should do.

 With so much pressure from the new Administration to staunch the flow of foreclosures, most lenders are more than willing to give you an ear and help you if they can, even in cases of Georgia foreclosure. In fact, I received a much anticipated call from one of my clients this weekend, giving me the good news of her successful loan modification. In spite of a foreclosure sale that was scheduled to take place several months ago, after an unsuccessful run at a loan modification. That effort only resulted in a HIGHER monthly payment (ludicrous, considering she had long been unable to afford her pre-mod payment), shortly followed by a foreclosure notice.

But just days before her scheduled foreclosure sale, the lender revisited her modification using the guidelines provided by President Obama's Making Home Affordable plan. Through many weeks of phone calls and faxes and with much patience and prayer, this client staved off the foreclosure and finally achieved a successful resolution. Now she can remain in her beloved home while paying a reduced monthly payment.  

Using these same guidelines, your lender may be able to recast your loan with more favorable terms and/or a principal reduction that makes your mortgage payment affordable and allows you to remain in your house. Ask them specifically for a Loan Modification under the Making Home Affordable plan.

So start by talking to your lender. And then, if that fails to resolve your dilemma, consider selling the property through short sale. It's usually a better alternative for your overall credit picture than is a foreclosure. And remember to call on a CDPE (Certified Distressed Property Expert), a REALTOR who specializes in sales situations like yours.

Learn more about loan modifications and short sales in Georgia.

Literally!

I've just eaten a scrumptious salad made primarily from the things in my own garden.

For many Americans, one of the main joys of home ownership is having a yard and enjoying a flower and/or vegetable garden. I personally get a proprietary thrill out of tending to my flowers and harvesting and lovingly preparing the fruit and vegetables I've grown in my own little patch of dirt.  

I'm not alone. Home gardening is on the rise again in the United States. I recently read that the National Gardening Association estimated 33 million households had an at-home garden last year. I suspect that number may have grown some this year. In a time of social upheaval and economic recession, a home garden provides a relaxing escape from it all as well as a healthy and economical home activity. And the ultimate rewards are, well...very tasty!

Patio people needn't be left out of this delicious trend. This season I tried my hand at container gardening on my miniscule sideyard patio. It's the place where I sit with my morning cup and have my quiet time with God. My new potted plants seem to love it as much as I do. Judging by these beautiful and tasty tomatoes, I may have discovered a new talent. I'm already thinking about what I can plant in a pot next year.   

Take my word for this, when it comes to tomatoes, cucumbers, sweet peppers, beans, carrots, summer squash, onions, hot peppers, lettuce and peas (the most popular vegetable crops for home gardens), you can't beat that sweet, wholesome home-grown flavor.

Nowhere is the foreclosure process faster or more brutal than in the state of Georgia. But even here, foreclosure can often be avoided -- even if you have already received the notice of sale. But don't wait until then to investigate your options. Find out for yourself what your possible outcomes might be as soon as you realize you're in trouble. In general, the Georgia foreclosure process can end one of five ways: 

(1) You could pay off the default amount to reinstate the loan during a grace period known as pre-foreclosure. This is anytime up to the day of the foreclosure sale on the courthouse steps.

(2) Under President Obama's new plan, you could apply for a loan modification, which will temporarily or permanently change the terms and maybe even the principal amount of your home loan. There are strict guidelines in place and not every home owner can be helped, but if you desire to remain in your property, this could be your answer. Contact your lender right way to get the process started. For more information see my web page on Obama's plan to help homeowners stay in their homes.

(3) You could sell your property to a third party during the pre-foreclosure period, allowing you to settle the loan "paid as agreed" and avoid having a foreclosure on your credit history. This is commonly referred to a s a "short sale", although there is nothing short about the process, which can take weeks and sometimes months to successfully negotiate. For more information on this option, see my Short Sale Frequently Asked Questions page at AvoidGeorgiaForeclosure.com

(4) If all else fails, your home will go into foreclosure and a third party may buy the property at a public auction at the end of the pre-foreclosure period. In Georgia, these auctions take place at the courthouse of the county of record on the first Tuesday of every month.

(5) Finally, if the lender doesn't get a high enough bid at the auction, they may take ownership of the property, usually with the intent to re-sell. The lender can take ownership through an agreement with the borrower/owner during pre-foreclosure, called a "deed in lieu of foreclosure", or by buying back the property at the public auction.

If you are interested in discussing any of the non-foreclosure options with a Certified Distressed Property Expert, contact me @ AvoidGeorgiaForeclosure.com

Georgia home owner, are you getting behind in your mortgage payments? Are you getting threatening letters from your lender? According to a well-known local real estate attorney, there are a few things you can do in these situations that will help to stave off the foreclosure process in Georgia, buying you time to pursue an alternative outcome.

One place to start -- always ask them to produce the original loan documents and the security instrument. In Georgia, these documents are required before a lender can foreclose.   Three types of security instruments are used in Georgia home purchases:

(1) Deed in Trust - This is a deed used in some states in lieu of a mortgage. It is rare to find this one used in Georgia, but it could be used in certain circumstances. In a Deed in Trust, title is held by a trustee on behalf of a lender (beneficiary) until the borrower (trustor) repays the loan.

(2) Mortgage - This is an instrument which secures a promissory note by either giving the lender a lien against the property or conveying title to the property, depending on state law. In Georgia, it is actually a lien agianst property. A mortgage requires judicial foreclosure.  

(3) Security Deed - This is actually an instrument to secure debt which conveys title to the lender until the debt is satisfied. When the debt is satisfied, the instrument is canceled. This is the most common security instrument used in Georgia property purchases, and does NOT require judicial foreclosure. That is why the Georgia foreclosure process is one of the fastest and most brutal in the nation. With a security deed, the policy is usually "you don't pay, you don't stay."  

Don't know which security instrument is held against your property? Ask your lender. Find out what you've got. Make them track it down. Issues to foreclosure can delay the process, buying you time to effect a workout plan,  loan modification, or get the debt settled "paid as agreed" through a short sale.

As we celebrate our fallen heroes, I send a shout out to all of our service men and women in the military and all of our courageous first responders here at home.

We know that freedom isn't free. Thanks for your sacrifice and service in protecting it for us.

Have a Blessed Memorial Day.