Written By David Martin of Counsel to Wesley Kent Hill Esq. & Associates

The nation has seen an explosion in foreclosures in recent years, and the State of Georgia has the dubious honor of being among the leaders in that trend, with one of the highest foreclosure rates in the country. Disturbingly, government agencies and private litigants have also exposed widespread abuse – and even fraud – on the part of some of the banks and other entities foreclosing on homes and other property. Fortunately for homeowners facing or threatened with foreclosure, recent legislation and the exposure of past abuses have equipped homeowners facing foreclosure with new legal tools for fighting back. This article will provide an overview of some of those potential tools.

Georgia is a “non-judicial foreclosure" state, which means the lender can foreclose on a home without filing suit or appearing in court before a judge. The procedures that must be strictly adhered to in order to legally foreclose on a property are spelled out in the Official Code of Georgia, sections 44-14-162 through 44-14-162.4. Beyond statutory law, recent judicial decisions have also strengthened homeowners’ foreclosure defenses.

A critical first step in assessing the validity of a foreclosure or threatened foreclosure is to determine who has the legal right to foreclosure on a property. Under Georgia law, the “security instrument or assignment thereof vesting the secured creditor with title to the security instrument shall be filed prior to thetime of sale." This can be a pivotal issue, because in recent years there has been a proliferation of assignments of mortgages and deeds, “splitting" the underlying debt from the security instrument. Foreclosure have also been brought – potentially unlawfully – by the “nominee" or servicer of the mortgage, rather than by the mortgage-holder itself.

As recently as July 7, 2011, the U.S. District Court for the Northern District of Georgia held that a non-judicial foreclosure may be wrongful where the foreclosing party does not hold both the security deed and the note at the time of the foreclosure.

Another recent tactic employed by mortgage-holders and mortgage servicers is the so-called “robo-signing" of mortgage documents, which erupted into a nationwide scandal. This device involves invalidly signing vast numbers of deed transfer documents and other assignments of title and mortgage documents between various entities. This tactic has been brought to courts’ attention, and where it appears in a property’s title history, foreclosure can often be defeated. Indeed, homeowners have brought claims for fraud on the basis of “robo-signed" documents, in part based on a Georgia statute which makes it a felony to file forged or fraudulent property documents. Shockingly, foreclosing entities are still pursuing foreclosures with these defects in the property’s chain of title.

Property owners facing foreclosure should be aware of the full range of legal defenses at their disposal and get immediately and actively involved in addressing any foreclosure or threatened foreclosure at the first opportunity, including conducting a careful analysis of the chain of title looking for any defects or other anomalies in that chain. Where there is a defect in the title, where the underlying debt and the purported title document on which the foreclosure is being brought are split, or where the foreclosing entity otherwise does not have the legal authority to foreclose on the property (an issue that has been raised frequently in recent foreclosure-defense litigation), the property owner has legal defenses to the foreclosure.

Simultaneously, property owners need to be intimately familiar with Georgia law governing the strict requirements which must be adhered to in order to foreclose on a property. For instance, where foreclosure is threatened, the property owner is entitled – pursuant to recent legislation enacted in Georgia – to very specific notice of the intended foreclosure, including the name and contact information of someone with whom they can negotiate a modification of the mortgage. Where that notice has not been provided, or other procedural requirements have not been met, it is a potential defense to the foreclosure process.

Procedurally, where a foreclosure sale has not yet occurred, the property owner who has any of these defenses (and potentially others) can file a petition to restrain the threatened foreclosure – that is, stop the foreclosure in its tracks. Immediately upon filing legal papers to challenge a foreclosure or threatened foreclosure, the property owner should also file a “lis pendens", which effectively clouds the title and prevents the property from being transferred to a bona fide purchaser.

If the foreclosure sale has already taken place and/or the property owner is facing eviction based on a dispossessory action, the owner may still file a lawsuit for wrongful foreclosure or to set aside the foreclosure, and the owner may be entitled to damages as well as being able to unwind the foreclosure. A lis pendens is generally also filed along with these claims as well, and the owner can move to stay the eviction.

Property owners facing or threatened with foreclosure should be aware of the variety of substantive and procedural legal options at their disposal for challenging the foreclosure process – no matter what stage of the process the foreclosure is in. Depending on the circumstances, property owners may be in a position to file an action to “Quiet Title" – that is, ask the court to declare that they are the valid legal owner of the property, and that any defective mortgage or assignment be rescinded. The critical issues in challenging the foreclosure process are understanding your rights, carefully inspecting and analyzing the underlying title and mortgage documents, and being prepared to take immediate legal action to protect and defend your rights and your property. Where properly presented and substantiated, many property owners have forestalled or defeated attempts to foreclose on their property.

For more information, or if you have questions concerning a threatened foreclosure or recently foreclosed property, feel free to contact Wesley Hill at 404.736.9167 or e-mail me at whillesq@gmail.com.