A rose-colored wingback chair anchors Lizzie Hall's world, a tiny house near downtown LaGrange that has been her home for 34 years.

The chair provides a place to read, follow the Braves on television and watch what's going on beyond her front door.

JOEY IVANSCO/AJC STAFF (ENLARGE)
A widow living on $984 a month, Lizzie Hall, 65, filed for bankruptcy to try to protect her house after a series of mortgages cost her almost $21,000 in fees.
RICH ADDICKS/AJC STAFF (ENLARGE)
An accounting error by his lender led to a foreclosure against Dunwoody resident Bijan Gooneh, he alleged in a lawsuit after his house was sold.
RICH ADDICKS/STAFF (ENLARGE)
Monique Johnson managed to sell her Fairburn home (behind her) three days before it was scheduled for auction.
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What they're saying "And whereas wee think it highly becoming Our Crown and Royal Dignity to protect all our Loving Subjects be they never so distant from us to Extend our Fatherly Compassion . . . And that it will be highly Conducive for the accomplishing those Ends that a Regular Colony of the said poor people be Settled and Established." — Georgia's Charter of 1732 "I wouldn't agree that we are pro-creditor. . . . If there were proven to be legitimate problems that needed the General Assembly to address them, I think there would be people who would." — Senate Majority Leader Bill Stephens (R-Canton) "The financial industry over here uses their power and influence to protect their interests. Their attitude is that they own the Capitol. Most times, they go unchallenged." — State Sen. Vincent Fort (D-Atlanta) "You hate to be so paternalistic, to decide that these individuals are better off having no access to capital, as opposed to having it at very high rates. As long as all parties understand the terms of the contract, we should allow those transactions to occur." — Dr. Roger C. Tutterow, chairman of Kennesaw State University's Department of Economics and Finance

It was in this chair that the 65-year-old widow realized one Friday last May that she was about to lose her world.

Hall was perusing the legal ads in the LaGrange Daily News — "just to see who was in there," she said — when she spotted first her name, then her address. Having finished only the sixth grade, Hall sometimes misses the subtleties of the printed word. The ad's message, though, was crystal-clear.

Her mortgage holder was announcing that it was foreclosing on her home — and intended to auction it off June 1 on the steps of the Troup County Courthouse, three miles away.

"I just went to pieces," Hall said recently. "I just love my house, and I don't want to go nowhere else."

In a panic, Hall looked for a way to hold on to the 1,000-square-foot brick-and-frame ranch she had bought for $16,700 when Jimmy Carter was governor.

She discovered what tens of thousands of homeowners learn every year: The house that means everything to its owner means little to the state of Georgia.

Public policy in this country for three-quarters of a century has been to promote the American ideal of homeownership. Georgia professes to support that goal, but no state does less to protect the homes of citizens hit by hard times.

In Georgia, once a borrower falls behind and a lender initiates foreclosure, a house can be sold on the courthouse steps in as few as 37 days. Only Texas and Tennessee allow foreclosures to proceed as quickly.

Other states give more leeway to borrowers. In Florida, lenders have to wait four months to sell a house in foreclosure; in Ohio, seven months; in New York City, well over a year.

Georgia gives borrowers precious little time to get the money together to bring their mortgages up-to-date. So the only way for most Georgians to stave off a foreclosure is to file for bankruptcy. But that often proves little more than a way station to losing their homes.

Unlike half the states, Georgia allows foreclosures to take place with no judicial or government oversight, leaving homeowners without a mediator, much less a protector to ensure they are treated fairly.

The state gets more involved in the sale of a repossessed stereo than it does in the public auction of a family home.

While Georgia's real estate foreclosure law has remained essentially the same since the 1880s, mortgage lending has changed dramatically during the past two decades.

Among the trends: Federal and state governments are expanding programs that help low- and middle-income families, with little or no financial cushion, buy homes for the first time. Leagues of homeowners are tapping into their equity to pay off credit cards, buy cars and take trips. And Wall Street is investing in mortgages as a hot commodity, spurring some mortgage lenders to seek out poor, unsophisticated borrowers for high-interest loans.

One bump in the road — a job loss, a sick child, a divorce — could introduce homeowners to the harsh realities of Georgia's foreclosure law.

The number of foreclosures initiated against properties in metro Atlanta's 13 core counties in 2004 was more than double the number in 2000, according to an AJC analysis of foreclosure data.

Most lenders say they don't start the foreclosure process until a borrower has missed two or three mortgage payments. But under Georgia law, it's the lender's call when to declare a loan in default, and from there, the process moves swiftly. "Georgia has chosen not to intervene to protect the vulnerable," said Frank S. Alexander, an Emory University law professor and expert on Georgia's foreclosure law.

Lizzie Hall clearly is among the vulnerable.

Hall is a soft-spoken, reserved woman who is self-conscious about her financial troubles. She quit her job in the shipping department of a LaGrange factory after losing part of her right leg in 1988 because of poor circulation. Four years later, her husband, a maintenance man at a McDonald's, died of cancer at age 50.

Since then, Hall has lived off a monthly check from Social Security, currently $994. To stay afloat, she took out a second mortgage on her only significant asset, her home, the first in a series of high-interest, high-fee loans that have eaten up almost half her meager income.

To make her mortgage payments, last year she borrowed against the insurance policy that is supposed to pay for her burial.

Now, she's barely able to keep up with her $479-a-month mortgage. Her home — as well as her sense of security — is on the line.

"I can't seem to get ahead," Hall said, "no kind of way."

A goal deflected

Bankers describe Georgia's lightning-fast foreclosure process as "efficient," one that keeps interest rates low and banks willing to make loans to risky borrowers. As evidence, they point to Georgia's homeownership rate, which now exceeds 70 percent.

"I view Georgia's laws as fair and balanced," said Joe Brannen, president of the Georgia Bankers Association. "The laws over the years have stood the test of time to people being able to get credit."

Georgia's quick process may make lenders less skittish about giving mortgages to people without a big cushion or perfect credit. But other states make foreclosure more difficult because separating people from their homes runs counter to the goal of putting them there in the first place — building stronger families and more stable communities.

"When a family loses its home, the children are taken out of school, the family's greatest hope for long-term economic stability is lost, the retirement fund that was going to be the paid-off house has disappeared," said Elizabeth Warren, a Harvard law professor and personal bankruptcy expert. "The tear in the social fabric is deeper in foreclosure than with any other kind of debt collection."

The tear is evident in places like Meadow Glen.

The subdivision is a racially diverse enclave of 200 starter homes in Fairburn, just off I-85 in south Fulton County. The houses, clustered and cookie-cutter in design, offer single people and young families a chance at an affordable home.

In July 2001, Monique Johnson, then 26, bought a three-bedroom, two-bathroom house in Meadow Glen.

The Atlanta native took advantage of a state program aimed at first-time home buyers, permitting her to purchase the $111,100 house with a down payment of only $1,200.

"It was beautiful — 1,500 square feet, a raised fireplace, a bonus room," Johnson now says wistfully. "It had a nice front porch."

Johnson ran into financial trouble after she quit her $34,000-a-year job as a manager of a specialty store at Hartsfield-Jackson International Airport. She now questions the wisdom of that decision, but says the stress of working at the airport after the Sept. 11, 2001, terrorist attacks had become too much.

"In my head, I was thinking that it would not take me long at all to find another job," said Johnson, who has a bachelor's degree in criminal justice from Morris Brown College.

Instead, it didn't take her long to go through her savings. For almost a year, Johnson managed to stay afloat working as a file clerk for a mortgage company at $8 an hour — roughly half her old salary. But by spring 2004, she was financially tapped out.

When she fell four months behind on the mortgage, her lender initiated the process to take her house.

Johnson pictured the worst: her furniture on the street, a foreclosure sign in front of her house. She worried what the neighbors would think. What she didn't know at the time was how many would understand all too well.

Since 2002, the analysis by the Journal-Constitution found, one in 10 houses in the subdivision has been in foreclosure and advertised for sale at public auction. Of the 13 houses on Johnson's block, six have been in foreclosure since 2002.

Several neighbors have hung on by filing for bankruptcy. One house was sold to a real estate investor on the courthouse steps in November 2003.

The same scenario plays out in neighborhoods across metro Atlanta. Other foreclosure hot spots are clustered in south DeKalb, near downtown Atlanta and in parts of Clayton County. Those neighborhoods tend to be overwhelmingly African-American, with most households earning less than $40,000 a year, according to data from the AJC analysis and the U.S. census. In the past five years, lenders advertised about 135,000 sales of properties in foreclosure in the 13 core counties in metro Atlanta. The effects of foreclosure can ripple through a neighborhood, depressing home values and undermining a sense of community.

"High foreclosure rates create a very high degree of instability in all of these areas," said Alexander, the Emory law professor. "This is the very reverse of what we are trying to achieve."

Accepting the realities of her situation, Johnson decided last May to try to sell her house before the bank did. In what she describes as an act of divine intervention, Johnson, a devout Baptist, found a buyer and closed three days before her home was scheduled to be sold at auction.

Had she lived in almost any other state, Johnson might still own a home. The same week she sold her house, she landed a job teaching special education at DeKalb County's Cedar Grove High School. The pay is more than enough to cover the mortgage payments.

Johnson has moved back in with her mother. At 30, she is not where she'd like to be. But she knows she is lucky.

Johnson still drives by her old home in Meadow Glen every chance she gets. She can't help but think about the fate of her neighbors facing foreclosure.

"I thank God I had somewhere to go," she said. "I do wonder about the other people. Did they have a safety net?"

Auction free-for-all

On the first Tuesday in January, a crowd gathered on the steps of the DeKalb County Courthouse in Decatur. Nearly 100 were waiting by 10 a.m. as a county marshal and a court clerk emerged.

Onlookers barely noticed as the clerk auctioned off a repossessed stereo used as collateral for a small loan. The clerk and the marshal quickly completed their official duty, the result of a court judgment against the borrower, and returned to the courthouse.

The government had managed the sale of a stereo that brought $20; it stepped aside as pieces of the American dream were sold to the highest bidder.

Over the next six hours, a collection of lawyers, loan officers and other representatives of mortgage lenders staked out spots on the courthouse steps to sell houses on which lenders had foreclosed.

Foreclosure sales take place in every Georgia county on the first Tuesday of each month, rain or shine, just as they have for more than a century. Property for sale is advertised in each county's legal notices, but no government agency takes part in the auctions.

It's a real estate free-for-all. The average cattle auction is a much more coordinated affair.

In DeKalb this month, four or five sales often happened at once. Potential bidders — many carrying color-coded printouts or handwritten tipsheets that made the scene resemble a day at the horse track — crowded around sellers.

Lenders' representatives read aloud from long lists of foreclosed property — one law firm was selling 153 homes — before offering each for sale. Experienced bidders came with cashier's checks or cash to cover the amount they were willing to pay. New players mostly stood to the side and watched.

A more orderly and competitive process could bring higher prices, diminishing the financial hit families take when their homes are sold outside the courthouse. Critics say the process is so chaotic it's hard for homeowners to challenge or even follow the sale of their most valuable asset.

"To describe what happens on the courthouse steps as a circus is being polite," Alexander said.

No oversight

No judge or government official plays a role in deciding which properties go up for sale on any given Tuesday.

In Georgia, home buyers routinely sign away any constitutional rights they may have to due process when they close on their mortgages, waiving the right to judicial review and putting lenders in control of a potential foreclosure.

In about half the states, including neighboring South Carolina and Florida, a judge must approve a foreclosure before it can proceed. In those states, homeowners have an automatic opportunity to contest a foreclosure, giving them more time to respond.

What happened to Bijan Gooneh, a Dunwoody homeowner, illustrates why many states require judicial review.

The native of Iran, who immigrated to the United States two decades ago, knew his lender had made an accounting error; a check bringing one of his two past-due accounts up-to-date had been applied to the wrong loan, according to a lawsuit he filed in Fulton Superior Court.

Countrywide Home Loans started foreclosure; Gooneh said that he then faxed the lender evidence of its error. Last August, one day before a foreclosure sale was scheduled, he said, a Countrywide employee assured him that the problem had been resolved and the sale canceled.

A few weeks later, a DeKalb County marshal pulled into his driveway and handed him an eviction notice. "They sold your house on Aug. 3," the marshal said. He told Gooneh to pack up and leave — he didn't own his house anymore.

"I felt numb all over," said Gooneh, 47, an Oriental rug dealer. "It was just a big shock. I didn't have any power to stand on my feet. I sat on the steps of the back-yard deck until I came to my senses and said, 'Now that this thing has happened, what can I do?' "

Gooneh sued Countrywide and the law firm that handled the sale. Countrywide declined an interview request. In an answer filed last week to Gooneh's lawsuit, the company admitted that "the foreclosure sale itself was conducted in error." But Countrywide challenged other allegations in Gooneh's suit.

He has remained in the house while the lawsuit is pending, but for now Countrywide, not Gooneh, owns the house.

"It's very scary and it affects the family too," said Gooneh, who is married and has one son in college and another who is 13. "They feel very insecure, asking, 'Do we have a house or don't we have a house?' "

Lenders who do business in Georgia insist that foreclosure is a last resort. They say they work with homeowners who show the promise of catching up and staying current with their house payments.

"Once the institution decides they have no alternative but to foreclose, obviously the most expeditious way to accomplish that is something any lender is going to be in favor of," said Steve Bridges, former state banking commissioner and now president and chief executive of the Community Bankers Association of Georgia.

In 2002, in a bill that targeted unscrupulous mortgage lenders, then-Gov. Roy Barnes tried to insert a requirement that a judge sign off on foreclosures of homes with high-interest mortgages.

"I wanted to make sure there was no equity stripping," said Barnes, referring to lenders who charge exorbitant interest rates and fees that tap equity built up by poor and elderly homeowners. "And the idea that you can privately take something is foreign to our notion of due process."

The requirement would not have applied to most mortgages, but Barnes could not sell the idea to key lawmakers. It came out of the bill.

'The only way'

Bankruptcy remains the only option most Georgians have to delay foreclosure. No state has more Chapter 13 filings — the reorganization option that most homeowners choose — than Georgia.

Federal bankruptcy courts across the state teem with desperate people seeking protection from credit card issuers and high-interest lenders. Many of them are trying to save their homes.

Everyone has a story to tell — of broken marriage, illness, an unfair lender. But bankruptcy court is not the place for those stories.

"I didn't want to go that way, but that was the only way," said Lizzie Hall, who filed last May, days after learning her mortgage holder planned to sell her house.

For now, bankruptcy has provided a refuge, but a tenuous one. The court has taken over Hall's financial affairs. Like others in Chapter 13, she has to live within a strict budget. She can't buy a car or refinance her house without permission.

The majority of people who enter Chapter 13 cannot keep up with their court-ordered plans. Many end up eventually losing their houses.

Even those who successfully complete their plan, which typically takes three to five years, will face higher interest rates because of the stain on their credit report.

Hall's path to bankruptcy court started with a second mortgage she took in 1998. Almost from the start, she couldn't keep her payments up-to-date, and she refinanced twice. When she fell behind on one loan, lenders simply allowed her to refinance with another.

But Hall paid a high price. Over four years she amassed, and financed, almost $21,000 in closing costs and fees.

She got her last loan from Irvine, Calif.-based New Century Mortgage Corp., the nation's second-largest lender in the so-called subprime market, which caters to risky borrowers at high interest rates.

Her loan benefited more than just New Century. The company pooled her mortgage with 6,100 other loans and sold them to a Wall Street investment bank, according to documents filed with the Securities and Exchange Commission. They now belong to an investment trust, which initiated the foreclosure on Hall's home.

A spokeswoman for New Century, Erin K. Freeman, declined to discuss Hall's loan, citing privacy issues. However, she said, the company makes sure that all borrowers receive a "tangible benefit" from its mortgages.

Indeed, Hall's last mortgage, taken out in 2002, had a lower monthly payment and a lower interest rate than her previous loan. But it still was full of unfavorable terms: a rate of 12.5 percent, penalties for paying off the mortgage early, high fees for her broker, and a $479 payment, nearly half her monthly income.

"You can look at this loan from Day One and say, 'She is going to be in foreclosure in short order,' " said William J. Brennan Jr., who oversees the Atlanta Legal Aid Society's Home Defense Program, which represents clients claiming to have been victimized by unscrupulous lenders. Brennan, a nationally recognized expert in mortgage lending, reviewed Hall's contract for the Journal-Constitution.

"She deserves to live out her retirement years in her lifelong home," Brennan said. "Instead, because she lives in Georgia, where there are few or no protections, she is targeted for an abusive loan that could cost her her house and is making investors on Wall Street rich."

Hall reached a tipping point last February.

More than three months behind on her payments, she borrowed $2,000 against her $5,000 burial insurance policy to get her mortgage up-to-date. She worried that when she died, her niece and nephew, her only surviving close relatives, would be stuck paying for her funeral.

But she had no choice. When she wired almost $1,800 to the mortgage holder's agent, it was her last resort.

But she said she couldn't afford to make more payments before May, when she read the foreclosure notice in the newspaper.

To keep her home, Hall will have to continue paying her mortgage, plus $125 a month to the bankruptcy court to cover her missed mortgage payments and other debts. Her bankruptcy plan, approved by a judge, is based on a budget that allots $86 a month for food and $10 for medical expenses.

Nevertheless, she believes she can make the budget work and save her home. She has to believe. With no children to turn to and only her niece and nephew, who can afford to give no more than nominal help, that's the only way she can keep her little house.

"I grew up poor and I'm still poor," Hall said. "Sometimes you feel like you are going out of this world backwards."