WHY DO WE NEED FORECLOSURE LAW REFORM IN GEORGIA?

 

Yes! I support the Rainbow PUSH Property Owners Bill of Rights for Georgia

 

·         Bankruptcy Reform and Judicial Review

·         Notice, Mandatory Mediation and Right to Cure

·         Right to Redeem

·         Protection for Tenants

·         No More Equity Stripping, Junk Fees or Penalties

·         PMI Protection for Homeowners

 

What Do We Want?  Justice.  When Do We Want it?  Now.

 

 

Judicial Review

 

There is no meaningful judicial review of foreclosure in Georgia.  Most states allow some type of court proceeding to permit a homeowner to present facts and circumstances to an impartial judge.  For most homeowners, the first time they get to court in a foreclosure proceeding is after the foreclosure is complete and the bank’s realtor is having them evicted in magistrate court.  By then it is too late for most homeowners, and there are no substantive defenses to foreclosure at that stage of the proceedings.

 

Right to Redeem and Right to Cure

 

Even if a homeowner is able to raise the money to repurchase her home after foreclosure, there is no right to redeem the property out of foreclosure.  The lender is not required to negotiate with the homeowner.  The homeowner has no right to regain the property for a reasonable period of time after the foreclosure, even if they have the funds to do so.  Also, the lender is not obligated to permit the homeowner to cure defaulted payments after the mortgage obligation has been accelerated. 

 

 

Notice

 

Homeowners receive insufficient notice of foreclosure in Georgia.  The lender is required to send a certified letter to the homeowner 30 days prior to foreclosure.  It is also required to run an ad once a week for four weeks in the legal organ (newspaper) for the county where the property is located.  Under most other circumstances, a legal proceeding is begun with “service of notice.”  This means that the person against whom the proceeding is brought is personally handed a copy of the summons. 

 

Protection for Tenants

 

Tenants often don’t know that the property they occupy has been foreclosed on until they are evicted.  Tenants need more notice and should be given a reasonable time to vacate, and/or existing leases should be honored.

 

Equity Stripping

 

Usually, in Georgia, the lender is the successful bidder at the foreclosure auction.  The lender is in the best position to know the value and condition of the property.  In Georgia, the lender typically bids exactly the amount due under the mortgage at the foreclosure sale.  Later, after the sale and foreclosure process is complete, the lender places the property for sale with a realtor.  If the property sells for more than is owed on it, the lender makes a profit.  Although Georgia law requires that excess price be refunded to the homeowner, the practice of lender bids at auction short circuits that requirement.  The lender strips the equity that would otherwise have gone to the homeowner. 

 

Junk Fees and Penalties

 

Once a home is in default lenders charge a variety of fees and penalties.  These range from late fees on missed payments, to advertising and legal costs.  Even if the mortgage is modified or reinstated, theses fees and penalties are added to the principal amount of the mortgage and interest in charged on them, increasing the cost to homeowners and making many modifications unfeasible and unaffordable.

 

PMI

 

Private mortgage insurance protects the lender if the borrower defaults.  It is commonly used in low down payment loans.  The homeowner pays the PMI premium as part of the mortgage, either as a one-time up-front charge, or in monthly installments over the life of the loan.  If the borrower is unable to make the payments, PMI pays approximately 85% of the outstanding mortgage balance to the lender.  No portion of PMI goes to the homeowner, even if the homeowner has accumulated substantial equity in the property and despite the fact that the homeowner pays the PMI premium.  PMI is a disincentive to loan modification.  A portion of PMI coverage should benefit the homeowner, in the event of default.  It could be used to cover missed payments, or it could be refunded to the homeowner to help him get a fresh start in the event modification is not feasible.

 

 Bankruptcy Reform

 

The United States Constitution recognizes that there are times that individuals are so deeply indebted that the only way back to economic security is to file for bankruptcy protection from creditors.  This right has its origins as far back as the Old Testament Jubilee every seven years when debts were forgiven.  Presently, there is very little bankruptcy relief available for homeowner facing foreclosure.  A chapter 13 bankruptcy can be used to temporarily stop a foreclosure and catch up on past due payments.  It cannot modify existing interest rates or other terms.  Neither can a Chapter 13 bankruptcy reduce the principal balance outstanding on the mortgage.  By contrast, an auto loan can be modified in a Chapter 13.  If you owe 20,000 on a car valued at 10,000, in most cases, the balance due on the auto loan can be reduced to the fair market value of the car.  Homeowners need similar protection.  At the January, 2010 Wall Street Project conference in New York, Congressman Barney Frank and Senator Chuck Schumer indicated that bankruptcy reform was the “only real solution” to foreclosure.