A loan for the purchase of property is secured by a mortgage or deed of trust on the real estate that the borrower has agreed to purchase. The loan contract is typically a mortgage that contains a “power of sale” provision. A power of sale clause in a deed of trust or mortgage is a mechanism that allows the borrower to authorize the sale of the property in a nonjudicial foreclosure sale if the borrower defaults on the loan. Significantly, a power of sale provision enables the lender to sell the mortgaged property on its own without the intervention of the court.
Most jurisdictions require the power of sale to be explicitly stated in the mortgage with the contract itself providing the terms of foreclosure. Foreclosures through power of sale are authorized only in certain states. Georgia permits foreclosures through power of sale. In power of sale foreclosures, the mortgage lender must follow specific procedures in order for the foreclosure to be valid since there is no judicial body overseeing the process. A foreclosure must be conducted through a judicial sale if the jurisdiction does not expressly approve a foreclosure by power of sale.
Foreclosures through power of sale have obvious advantages for most lenders. The foreclosure can proceed more quickly and easily when the court is not appointed to supervise the sale. The expediency of the process amy also be advantageous for the borrower. In addition, both parties can benefit from this type of foreclosure since the terms of the foreclosure can be negotiated ahead of time by the borrower and lender and memorialized in the mortgage agreement.
Power of sale foreclosures may also have certain disadvantages for both debtors and lenders. The parties may eventually require court intervention in nonjudicial foreclosures in some cases where a problem arises with the mortgage, such as a defect in the deed. Moreover, lenders in some jurisdictions may be denied the opportunity to receive a deficiency judgment if foreclosure takes place outside the court system. A deficiency judgment is a judgment against the borrower when the mortgage foreclosure proceeds do not satisfy the loan in full.
The experienced team of attorneys at the Law Offices of Mark Weinstein, P.C. can help you litigate your real estate claims. Contact Mark Weinstein and his colleagues at (770) 888-7707 or visit them at https://www.markweinsteinlaw.com to find out how they can advise you.