Many people do not realize that there are powerful means by which a homeowner can stop foreclosure, even if they are facing serious financial difficulties. Georgia is seventh in the nation in foreclosure rates, creating many debtors who need help in this area. Georgia is a title theory state, meaning that the lender holds the deed to a property until the mortgage is paid in full. Most agreements contain a power of sale clause, allowing a lender to enact a non-judicial foreclosure if the borrower defaults on their loan. This process generally takes between sixty and ninety days, at the end of which time the sale proceeds are used to pay the loan amount. However, if the proceeds are less than the amount owed, the lender may sue for deficiency, or the difference between the mortgage amount and the sale price. Nonetheless, there are alternatives to foreclosure in Georgia.
Federal Mortgage Assistance
Qualifying for assistance programs from the federal government can be difficult, but those who do often find that these programs are powerful.
- While in the past, mortgage holders who had debt amounts forgiven found that that money was taxed as income by the IRS, the Mortgage Forgiveness Debt Relief Act of 2007 now prohibits such actions.
- Some homeowners will be able to refinance their mortgages through the Homeowner Affordability and Stability Plan, in which the government provides incentives to lenders who offer lower rates and better payment schedules.
- Lenders are also given incentives though the Hope for Homeowners Act to refinance or adjust the terms of high-interest or variable-rate mortgages to FHA-backed loans with more acceptable rates. They are also given incentives to waive fees for early repayment and late payments and to reduce principal amounts.
Lender Assistance
With so many homes in foreclosure, many lenders are more willing than ever to work with troubled debtors, especially if those borrowers notify them before they must delay or miss payments.
- Lenders may agree to loan modifications if they believe the borrower is sincerely making an effort to bring their loan current and will be able to do so with lower interest or payments, or a change in terms from variable rate to fixed rate loans.
- Mortgage holders may be willing to reinstate a home loan that is already in default if the borrower can show that they expect a extra income in the near future, allowing them to catch up through several large, or one lump sum, payments.
- Lenders may also be willing to show forbearance by allowing a few missed payments or late payments, as long as there is evidence that the borrower will soon get back on track and be able to make up the missed payments at the end of the loan.
Bankruptcy Options
Bankruptcy does have damaging drawbacks, such has the negative marks on a person’s credit score that may last for years, but it also provides some breathing room for the filer to pursue options other than foreclosure.
- Automatic Stay – as soon as bankruptcy is filed, the filer receives a court-ordered stay, or hold, on collection or foreclosure actions. And while a lender may petition the court to remove that stay, even approval takes time that the borrower can use to resolve their situation.
- Chapter 13 – This type of bankruptcy allows borrowers to reorganize their finances and formulate a repayment plan, with the help of their lawyer and the bankruptcy trustee, that will allow them to repay all their debts in a specified period. If they conform to the plan and don’t miss any payments, they may be able to protect their home and stop foreclosure.
- Chapter 7 – This type of bankruptcy is also called liquidation, because it often requires the filer to liquidate, or sell, some of their personal property to pay creditors. However, Georgia does allow a $10,000 exemption (which may be doubled for married filers) for property that is used as a residence. Other consumer debt may be discharged, or erased, allowing the filer to focus on keeping their mortgage payments current.
Pre-Foreclosure Home Sales
If it becomes inevitable that the homeowner is going to lose their property, they may have the option to sell their home before the lender forecloses.
- Sale for Profit – if the debtor can sell the home for more than what they owe, they will realize a profit by which they can relocate and solve some of their other debt problems.
- Short Sale – If they are unable to sell for profit, they may have a buyer who makes an offer just below the amount owed. A lender may agree to accept that sale price to fulfill the mortgage as a short sale. However, it is crucial to have the lender agree to this in writing to avoid a deficiency judgment for the difference, which is allowed according to Georgia law.
- Deed in Lieu of Foreclosure – If the lender has a strong real estate department, they may be willing to accept the property deed in lieu of foreclosure, satisfying the amount of the debt. Again, this must be agreed upon in writing to prevent deficiency judgments.
Getting Legal Help Stopping Foreclosure in Georgia
Clearly, there are a number of options available to the troubled homeowner, but they can be confusing. Some of the most important sources of guidance can be found in a foreclosure attorney committed to helping the borrower and a free or low-cost counselor from the U.S. Department of Housing and Urban Development (HUD). It is never wise to employ a debt consolidation or modification company without extensive research and legal advice to ensure that they are not one of the many con artists who charge high fees for little or no service.
