Horrendous Georgia Law Regarding Distressed Homeowners (foreclosures, loan, attorneys)

[ATL Golfer]

I've never heard of the big/national banks using this for residential, but many smaller community banks do. I occasionally buy foreclosures and learned about this unfortunate situation/law.

Georgia law dictates that a bank can charge a 15% premium of the principal balance as a "reasonable attorney fee" at the time a loan matures/is foreclosed upon.

Its rare, but sometimes properties with equity in them are sold at foreclosure sale. When that happens investor bids are higher than the balance owed to the bank. The bank is made whole.

In any other state in this instance, the overage goes to junior lien holders (2nd mtgs, taxes, water bill liens, etc) and if there are still leftover funds, the borrower gets those funds as that is their equity.

My partners and I purchased a property for $500,000 at auction. The loan balance was $430,000. The bank pocketed SEVENTY THOUSAND DOLLARS in PROFIT off of the foreclosure. There were no junior lien holders. In any other state, except assbackwards Georgia, this would be strictly against the law.

This homeowner put down $100k in down pmt when he bought the home. Thought he had a hard money loan lined up to take out this lender until he could get traditional financing and then before he knew it there was not time. Foreclosure moved very quickly for him. He had a local bank finance the purchase because a career change disqualified him from traditional financing...no work history while creating a start-up.

Even if there was say a $10,000 tax bill or a $50,000 junior lien holder...under the law, these banks can absorb all of the equity and leave everyone else holding the bag. It is a very dangerous law. It provides an incentive for banks to be aggressive and seek higher profits. It does not protect the people. It puts more money in greedy banks' hands.

[ATLTJL]

Whether your situation is divorce, foreclosure, or personal injury.....the only people who always benefit are attorneys. And with hourly billing, they are also motivated to make the process take as long as possible.

[Silvers2]

Sharks and vultures.

[ATL Golfer]

Think I'm going to make it my mission to have this law changed.

This borrower recd a payoff just before closing that specified attorneys fees at $7k. The day it was foreclosed those fees ballooned to $70k instantly.

Legalized theft and quite frankly disgusting.