Georgia Foreclosures

Each state has its own process and rules for foreclosing on a mortgage/deed of trust/security deed. Some states require a judicial process and some do not.

Georgia does not require a judicial process. In Georgia, the lender sends out the required notices, publishes the sale in the county newspaper, and auctions the property at the courthouse steps on the first Tuesday of the month.

In Georgia, a foreclosure of a purchase-money security deed (the type most homeowners have) would normally extinguish any second security deeds/mortgage or subsequent judgment liens on the property. Keep in mind that federal law always supersedes state law, so federal liens and claims will not always be wiped-out by a foreclosure. (Note: If the borrower comes back into title after foreclosure, any inferior liens would re-attach to the property). 

Federal entities like the IRS and the Department of Justice are ruled by federal law. Neither IRS nor Department of Justice liens are discharged by a foreclosure. The IRS has its own rules, which require the foreclosing lender to provide notice of the foreclosure to the IRS at least 25 days before the sale, or get consent from the IRS for the sale. After the sale, the IRS has the right to redeem the property for 120 days after the sale. (This rarely happens).  

During the recession and mortgage crisis of 2007-2010, there were federal programs to help borrowers catch up on their mortgage payments. Some of the programs would set aside a portion of the loan to be held by HUD in a second mortgage. These security deeds are recorded and often called ‘Partial Claim’ security deed/mortgages. They must still be paid in full at a sale or refinance of the property. The second security deed/mortgage had no payments and borrowers often forgot about them.

HUD is also a federal agency. The Court of Appeals has affirmed a recent court case in Missouri that held that HUD mortgages are not extinguished in a non-judicial foreclosure per USC § 2410(c).  (Show Me State Premium Homes, LLC v. McDonnell, 74 F.4th 911). The decision holds that HUD must release the mortgage ,or the foreclosure must go through a judicial process.

A foreclosure does not ‘cleanse’ the title of all other claims. The non-judicial foreclosure in Georgia does not eliminate tax liens, IRS liens, Department of Justice liens, or second mortgages held by HUD or any other federal agency.  If there is a second mortgage held by HUD, it might require a judicial foreclosure if HUD is unwilling to release their mortgage. Even though most foreclosures in Georgia are non-judicial, a judicial foreclosure may still be required to extinguish a second mortgage held by HUD or any federal agency.   

John C. Bennett is a real estate closing attorney and owner of Origin Title and Escrow, Inc.. Since 2003, Origin Title has handled real estate transactions – purchases, refinances, reverse mortgages – quickly and professionally. There will be no surprises, nothing misunderstood. Title searches are thorough and well-reasoned, to avoid unpleasant surprises later down the road. Calculate your closing costs in Georgia or Florida using our calculator or contact Origin Title using this form.