georgia.gov - New Law Adds Fairness To Foreclosure Process

On May 13, 2008 Governor Sonny Perdue signed into law Senate Bill 531. The bill, strongly championed by its lead sponsors, Senator Bill Hamrick, the Chairman of the Senate Banking Committee, and Senator Nan Orrock, increases the notice to a homeowner before a lender can foreclose and introduces elements of fairness to the foreclosure process.

The law that has been on the books in Georgia since 1981 only requires a certified letter giving notice of the foreclosure sale to be sent to the homeowner a minimum of 15 days prior to the scheduled foreclosure. An advertisement must be run in a legal newspaper for four consecutive weeks prior to the foreclosure, which has meant that the legal advertisement could begin running before a homeowner had received notice of the foreclosure. Many of the legislators who supported SB 531 felt that out of fairness, a homeowner should receive notice before the advertisement is published, and that 15 days was not a sufficient amount of time. SB 531 therefore lengthens the notice period to at least 30 days prior to the scheduled foreclosure sale.

SB 531 also requires that the certified letter giving the homeowner notice of the foreclosure sale include the name, address, and telephone number of the “individual or entity who shall have full authority to negotiate, amend, and modify all terms of the mortgage with the debtor.” This provision of the bill is important because when homeowners are negotiating with their servicers, they often do not know what entity actually owns their loan. Sometimes a servicer will refuse to offer the homeowner a loan modification or other workout, claiming that they lack authority to do so. If the homeowner wants to reach the company that ultimately has the authority to accept any workout agreement, or if the homeowner wants to pursue a legal claim related to their mortgage loan, he or she needs to know the identity of the current holder of the mortgage loan. This bill requires that identity to be disclosed.

Lastly, SB 531 requires that the current holder of the mortgage loan record the assignment of the security deed, which shows the present owner of the mortgage loan, in the public deed records before conducting the foreclosure sale. The securitization of subprime mortgage loans at a hectic pace in recent years has resulted in some confusion over which loans are in which securitized pools. On many occasions, the wrong entity has commenced foreclosure proceedings against a homeowner. When this happens, it is fundamentally unfair and could mean that a homeowner is still obligated to the true creditor after the foreclosure has been conducted by the wrong entity. Therefore, SB 531 requires a much-needed safeguard against misbehavior and mistake by companies trying to foreclose.

The successful passage of the bill was made possible by the tireless advocacy of Senator Orrock, the leadership of Chairman Hamrick, the collaboration of Representative Wendell Willard, Chairman of the House Judiciary Committee, and Representative Ed Lindsey, Chairman of the House Judiciary Subcommittee which addressed this bill, and the efforts of the Working Families Caucus, Georgia State Trade Association of National Developers, Atlanta Housing Association of Neighborhood-based Developers, and the Home Defense Program of Atlanta Legal Aid. The bill takes effect July 1, 2008.