Bank of America announced earlier this month that it had suspended foreclosure activity, first in just 23 states, then later in all 50 states.
Charges of "robo-signing" involved bank employees signing affidavits in huge numbers without first determining whether they were accurate. Other major lenders followed suit but limited their suspension to the first 23 states named by Bank of America.
Unfortunately, this action will do little to help Georgia borrowers who may be unable to make payments on their home loans.
That's because Georgia offers lenders a process called "nonjudicial" foreclosure. This form of foreclosure is preferred by lenders because it does not require that they find or serve papers upon their borrowers, and it does not involve an opportunity for a court to review the claims of the lender.
Here is an overview:
- When a Georgia borrower misses a payment, he typically has a 15-day grace period to make the "on-time" payment. If no payment is made, the loan is said to be "in default."
- Lenders in Georgia are not required to allow a borrower to make the payment and reinstate the loan, but routinely they do so. From a practical standpoint, the lender much prefers to receive the money rather than having to foreclose.
- At some point, the lender gives up on the borrower and sends a notice of acceleration, demanding that the borrower pay off the loan balance in full within 30 days.
- At the same time, the lender transfers the loan information to the attorney representing the lender, known as the foreclosing attorney. That firm posts a "Notice of Sale Under Power" ad in the legal newspaper in the county where the collateral property is located. That may be the only notice the borrower ever gets that he is about to lose his home. The ad must appear for four consecutive weeks.
- After notice is completed, the foreclosure auction is held by the foreclosing attorney on the steps of the local county courthouse.
These auctions are held on the first Tuesday of each month and must be conducted between 10 a.m. and 4 p.m. No court official or sheriff is present to supervise. The opening bid is almost always from the lender in the amount of the debt plus attorneys fees. The highest bidder buys the property for cash.
In today's soft market, it is rare to find a bidder willing to pay more than the loan balance for one of these homes. That explains the huge number of vacant and foreclosed homes clogging up our metro neighborhoods.
Most other states require lenders to serve papers on the borrower and have a court hearing to determine whether the lender has a right to foreclose. That process, known as "judicial foreclosure," is being used in those states to challenge or delay the loss of a borrowers home.
John Adams is an author, broadcaster and investor. He answers real estate questions at noon on Saturdays on WGKA (920 AM).
For more real estate information or to make a comment, visit www.money99.com.
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