The number of homes in the 13-county metro Atlanta area being advertised as going into foreclosure hit an all-time high last month, with over 6,000 homes headed to the recent December auction. Because the process of foreclosure varies from state to state, let's review some of the most frequently asked questions about Georgia's foreclosure procedure:

Q: What does the word "foreclosure" actually mean?

A: In Georgia, foreclosure is the legal process by which a home lender can repossess or auction a borrower's real estate after that borrower fails to make payments as outlined in the original loan documents.

Q: What are those loan documents?

A: The first is the note, which is essentially a formal IOU. This document makes the borrower personally liable for repayment of the debt and is not recorded at the courthouse. The second is a security deed, and it pledges the property as collateral for the loan and outlines the procedure for collection and repossession, should that become necessary. Security deeds are always recorded publicly.

Q: When a borrower is late making a home loan payment, how quickly does the lender act, and when does the foreclosure occur?

A: Technically, a lender could demand that a borrower cure an event of default such as a missed payment as soon as the payment is late, but most home lenders are hopeful that the borrower will quickly catch up their loan. As a result, lenders often try to work out a payment plan to avoid having to foreclose.

Q: If the lender can take the house back, why wouldn't they foreclose right away? Can't the lender simply sell the house and get paid off?

A: In Georgia, the borrower is usually given multiple chances to catch the loan up or work out a payment solution. This may involve restructuring the loan or postponing past-due charges. Lenders often lose substantial amounts of money as a result of foreclosure and would prefer to avoid it if possible.

If all else fails, the lender must advertise the upcoming foreclosure auction in the legal newspaper of the county where the property is located. The ad must appear for four consecutive weeks, and it must contain specific wording. In addition, the lender must attempt to notify the borrower of the sale date by mail.

On the first Tuesday of the month after advertisement, a representative of the lender will conduct a public auction on the courthouse steps. The house is then sold to the highest bidder for cash. Anyone with the appropriate funds can participate.

The opening bid is usually from the lender in the total amount of the debt, including attorney fees. Subsequent higher bids, if any, can come from those present. The highest bidder wins the auction and eventually becomes the owner of the house.

Q: What happens to the money?

A: The funds are first used to satisfy the debt to the foreclosing lender. If any is left over, it is used to satisfy junior liens, such as second mortgages or home equity lines of credit. Finally, any remaining funds are given to the borrower.

Q: What happens if no one bids at the auction?

A: In many cases, the amount owed exceeds the current value of the house being used as collateral. If that happens, the lender will make its opening bid, and then no one else will offer a bid. The lender is declared the winning bidder, and ownership of the house is transferred to the lender. In these cases, the lender will almost always try to sell the house as soon as possible.

Q: So, doesn't the lender come out even after they sell the house?

A: Usually not. If there were enough equity in the house to cover the loan, the owner could probably have sold it and paid the lender off. Likewise, if the house was worth more than the loan amount, it is likely that an investor would have bought the house at auction to try to make a profit. To make matters worse, lenders incur substantial expenses while trying to sell, such as marketing costs, management and insurance fees, and lost interest payments.