With the downturn in the economy and the real estate crash, many problems have arisen for homeowners and mortgage lenders alike. Oftentimes the interplay of the federal loan modification programs and state based foreclosure laws are coming into sharp disarray and it is the homeowners that are getting the short end of the stick, and many times they are being bashed with the stick. It is very clear that the lenders have a position of strength compared to the typical homeowner in these disputes. Unfortunately, and it is either by design or by negligence, many lenders appear to use the federal loan modification programs (HAMP and HAFA) as the carrot, and they lead the homeowner promising a loan modification, many times up until the day of foreclosure, and then hit them with the stick based on state foreclosure laws. It would further appear that more often than not, there was never any real intent on the part of the mortgage lender to modify the loan from the beginning.

Our clients repeatedly inform us of multiple submission of the identical documents, 'lost' or 'missing' pages in documents. I have to seriously wonder how so many fax machines keep randomly destroying documents, and that it is only happening to mortgage services and lenders, you would think there would be some massive product recall by now by fax manufacturers!!! Homeowners are repeatedly put on hold for hours, transferred to voicemail that is never returned, given incorrect phone numbers, files transferred to new associates who start the process over, non-returned calls, in what appears to be behavior designed to deny access to the Federally funded HAMP program. See article where Inspector General declares HAMP program is a failure (USA Today Money section).

The federal loan modification programs do not require the mortgage lenders to modify loans. It is a more accurate description to say that the modification programs require the mortgage lenders to allow homeowners to apply for a loan modification, and for the lender to get paid to handle the application. When considered in this light, it means that there is no requirement that any loan be modified.

It is unconscionable that many mortgage lenders require that homeowners go into default on their mortgage before the bank will even consider an application to modify the loan. Of course the homeowner wants the modified loan and so they do what the bank tells them, and they stop paying, or begin paying a reduced amount. What the mortgage lender doesn't tell the homeowner is that the reduced payment is an event of default and that the reduced payments are being reflected negatively on the homeowner's credit score. Typically the reduced payment is a Forbearance Agreement, which means that the lender will in fact forebear from foreclosure for that period, but if the modification is not granted the amount not collected during the forbearance period becomes due immediately. The homeowner can no longer seek to refinance anywhere else since the current lender has damaged the homeowner's credit. If the lender did not have it already, the reduced payment gives the mortgage lender exactly what it needs to empower the lender to utilize the state based foreclosure laws, a default on the mortgage obligation. The reduced payment also causes the homeowner to dig a deeper hole than the one they are already in. This is a travesty, particularly when considering the homeowner that went into default based on the instruction of the lender, in order that the homeowner have the opportunity to apply for a modified loan, they were not in default before they entered the program, but by gaining entrance to the program they have gone into default, and when the lender "denies" the application for a modified loan, if the homeowner cannot come up with all of the money they would have paid the lender during the time of the reduced payment or non-payment, as instructed by the lender, then the home will be foreclosed on.

Why would a lender go to all this trouble to push a homeowner out of their property? If the economy is in a recession, why wouldn't the lender try to do a workout with the homeowner to try to preserve the lender's loan and homeowners home. It is simple, the lender makes more money by foreclosing. If your loan is for $200,000, when you took it out you also most likely bought PMI for 20% of the value and the lender had the remainder insured by Fannie Mae or Freddie Mac. If the loan was securitized and sold to a trust, there may be additional insurance from a company like AIG. Your $200,000 home is now worth $120,000. If the bank forecloses you think they will sell it for the $120,000 and take a loss, but when they foreclose, they will collect on the PMI, and the insurance from Fannie Mae, they get paid on the original mortgage amount, the $200,000, not the depressed value, and turn the asset over to Fannie Mae – taking it off their books. Is it a wonder why so few homeowners mange to qualify for the HAMP program?

Another thing to be wary of in your negotiation with your lender is that the Loss Mitigation Department is independent of the Foreclosure department. Even though they are departments in the same institution they don't 'talk' to one another. So while the loss mitigation department will negotiate with you, the Foreclosure department waits on the sideline to file a foreclosure regardless of (or oblivious to) what promises or commitments have been given to you by the loss mitigation department. We have had clients who have been foreclosed on only to receive a modification agreement two weeks later in the mail.


Georgia is a "non-judicial" foreclosure state. At least initially, there is no judicial involvement or oversight in a Georgia foreclosure sale. The requirements on the mortgage lender are minimal. In a nut shell, the laws require that the lender send a certified letter to the homeowner, explaining the bank's intent to foreclose, describing the accelerated amount that is due to prevent the foreclosure, and notice of when the sale will take place. The lender must also run an advertisement in the local newspaper (the legal organ of the county) for a period of four (4) weeks leading up to the sale. After the advertisement runs, the lender calls the property out for sale on the courthouse steps, on the first Tuesday of the month following the run of the advertisement. This is a minimal process, but the lenders quite often fail to properly satisfy these simple requirements. Some homeowners are feeling overwhelmed and simply do not answer the registered mail that is sent by the lender. The post office will note all the attempts at delivery and after 2 or 3 attempts will deem the certified letter undeliverable. The law considers this letter delivered, it is as good as if you received it opened it and read it. Ignoring the certified letter will not make the problem go away, and is not a defense against the foreclosure action.

What should you do? The first thing you should establish is if it is worth it to save your house. Look at the actual value of the home in this depressed market, you could be paying on a lot of phantom equity that is no longer in the property. The other issue is whether you can afford to make payments going forward, has whatever financial trouble you experienced passed, and are you at the point where you can afford to make payments in the future. Do not think that you will get a house for free, or that you will get a 0 interest loan. The HAMP guidelines start at 2%, and raise during the following years to close to market rates, but this is for the program that is difficult to get into.

If you are involved in a loan modification program, and/or you are facing foreclosure, you likely need the assistance of experienced legal counsel to represent you. Without a legal representative, if you get into a dispute with the bank, there is a good chance that they will roll right over you. Many times we are successful in resolving these matters through negotiation and without litigation, but that typically requires that we have become involved well in advance of any foreclosure sale date. When time is running out and the sale date is imminent, the only way to stop the foreclosure from going forward is to bring a lawsuit against the bank in the Superior Court. If time is dramatically short, we must seek an emergency, retraining order from the Superior Court Judge to halt the foreclosure process.


If the foreclosure sale has already occurred, all is not lost and there still may be a chance to remedy the matter and keep the home. After foreclosure the purchaser of the property at the foreclosure sale gains the right to evict or dispossess the homeowner. After the foreclosure, the homeowner becomes classified as a tenant at sufferance. The eviction process in Georgia is quick and takes place in Magistrate or State Court. When the dispossessory is filed and served, the homeowner has ten (10) days to file their answer. Upon a trial of the case the judge does not have authority to determine whether the foreclosure was proper or not and the judge can only give the homeowner seven (7) days to vacate the premises. In this dynamic, only the Superior Court has the authority to restrain the foreclosure process and/or the eviction process. If the foreclosure sale has already happened, and especially if the eviction process is imminent or already started, the homeowner has very little time. It is possible to be evicted from your home in less than twenty (20) days after the foreclosure sale date. We have brought suit to keep clients in their property even after a dispossessory has been issued. The longer you wait the more difficult it is to get a timely response and file a lawsuit, the time to contact an attorney is during the foreclosure process, but it is not to late if you act as soon as you get notice of the dispossessory.