Georgia Foreclosures: Hints For Investors And Homeowners

In Georgia foreclosures have increased dramatically over the last two years

. The same is true of states throughout the United States. The increase in foreclosures is due in part to poor performance of all economic sectors. Another major reason for an increasing number of foreclosures is the increase in the number of risky mortgage loans approved over recent months.

When a borrower takes out a loan that represents a repayment amount each month that is at the top limit of earnings for the household, there is a higher risk of default on the loan. Almost any financial occurrence will make it impossible for the borrower to continue to make monthly payments. The loss of a job or the illness of a wage earner can make mortgage payments impossible to meet, even under the most optimum of mortgage loan terms.

Many mortgage loans that were made eighteen to twenty-four months previously provided for a variable annual interest rate. These loans might have been created to require no interest payment adjustments for two years, but at the end of that period, the interest rate could then be adjusted to current levels. At the same time, the principal amount on the loan would come due in what is known as a balloon payment. The assumption was that the borrower would be able to refinance the amount of principal at good interest rates. The premise also included the assumption that credit would be readily available for refinancing.

Other poorly structured loans included those where the borrower was in a negative equity position. The payments made over the first two years of a loan might not be paying the amount it would take to reduce the principal. Then, the borrower determined that qualifying for the mortgage that would be required at the time of the balloon payment was no longer possible.

As unemployment rates increase and more companies close their doors, foreclosures have ballooned. Foreclosure is the name given to the process of a lender taking the property back when the borrower defaults on mortgage payments. Georgia recognizes both judicial and non-judicial foreclosures.

A clause in most trust deeds allows lenders to complete the foreclosure without going to court. The lender files a notice and borrowers then have 30 days to catch up the amount that is past due. Some deeds allow the borrower to continue on with the property after a cure of the default; other mortgages require the entire amount of the loan to be repaid within the 30 days--a feat that is seldom possible.

The next step is to post a foreclosure sale in the local newspaper for a period of four weeks prior to the sale date. The prescribed date for a foreclosure sale is on the first Tuesday of each month. The sale begins at ten am and is held at the county courthouse. Cash to pay for the sale is due immediately from the winning bidder.

Within five days after the sale, a court ordered hearing must be held to confirm the validity of the sale. If the market value of the home is not received, the court can order a new sale. The buyer has no further rights to the property.

by: Jack Bennington

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