Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice. Individual situations will differ and should be discussed with a licensed attorney. For specific legal advice on the information provided and related topics, please contact the author.
There’s no way around it, going through foreclosure is a frustrating and stressful process. But if you understand how the foreclosure process works in North Carolina and what to expect, you can ensure that the proper procedure is being followed, provide yourself with some peace of mind, and make informed decisions that will help you make the best out of a bad situation. There are options available to North Carolina homeowners that may be able to help you stop foreclosure and save your home.
THE FORECLOSURE PROCESS IN NORTH CAROLINA
North Carolina’s Foreclosure Statutes
The laws that govern foreclosure in North Carolina are:
North Carolina General Statutes, Sections 45-21.1 through 45-21.38C, and
North Carolina General Statutes, Sections 45-100 through 107
You can view North Carolina’s foreclosure statutes on the North Carolina General Assembly’s website--click here.
Types of Foreclosure in North Carolina
There are two types of foreclosure in North Carolina—judicial and nonjudicial. In a judicial foreclosure, a lawsuit is filed in court and a judge decides the matter. In a nonjudicial foreclosure, there is not a formal lawsuit, but a more informal hearing with a clerk of court. The vast majority of foreclosures in North Carolina are nonjudicial. Accordingly, this article will focus only on the nonjudicial foreclosure process.
Required Foreclosure Notices in North Carolina
In North Carolina, there are four notices that must be given during the foreclosure process:
Pre-foreclosure Notice. At least 45 days before starting the foreclosure process (by filing a notice of hearing), the foreclosing party must mail the borrower a notice stating the amount due and informing the borrower of resources that are available to help avoid the foreclosure. North Carolina General Statutes, Section 45-102.
Notice of Default. At least 30 days prior to the date of the notice of hearing, the foreclosing party must mail the borrower a notice of default that itemizes the amount of principal, interest, and any other fees or expenses that are due, together with the amount of daily interest being charged on those amounts. North Carolina General Statutes, Section 45-21.16(c)(5a).
Notice of Hearing. To officially file and begin the foreclosure process, the foreclosing party files a notice of hearing with the court clerk. A copy of the notice of hearing must be served to the borrower at least ten days before the hearing takes place (or 20 days if the notice is served only by posting a copy at the property). North Carolina General Statutes, Section 45-21.16.
The clerk of court may continue (postpone) the hearing for up to 60 days if the foreclosing party and the borrower are working towards a solution that will make the foreclosure unnecessary. North Carolina General Statutes, Section 45-21.16C.
Notice of Sale. At least 20 days prior to the date of the foreclosure sale, the foreclosing party must:
mail a notice of sale to the borrower;
post the notice of sale in a public place (typically at the courthouse where the foreclosure sale will take place); and
publish the notice of sale in a newspaper once a week for two successive weeks before the foreclosure sale takes place.
North Carolina General Statutes, Section 45-21.17.
Special Protections for Military Servicemembers in North Carolina Foreclosures
North Carolina does not allow a nonjudicial foreclosure to take place while a borrower is engaged in active military service (or within 90 days of active military service) if the borrower took out the mortgage before going on active duty. North Carolina General Statutes, Section 45-21.12A.
The Servicemembers Civil Relief Act is a federal law that also provides protections for military servicemembers who are facing foreclosure.
Right of Redemption Before and After Foreclosure Sale in North Carolina
In North Carolina, the borrower can redeem the property before the foreclosure sale by paying the entire amount still owed on the mortgage plus all of the expenses related to the foreclosure. To find out the exact redemption amount, contact the foreclosing party’s attorney. North Carolina General Statutes, Section 45-21.20.
In North Carolina, the borrower can redeem (repurchase) the home after the foreclosure sale by filing an “upset bid” within ten days of the foreclosure sale. The upset bid must be at least 5% more than the foreclosure sale price, but no less than $750. There are strict statutory procedures required to file a successful upset bid, be sure to follow the statute carefully. North Carolina General Statutes, Section 45-21.27.
Post-Foreclosure Deficiency Judgments in North Carolina
When the amount owed on the mortgage is greater than the amount the property sells for at the foreclosure sale, the difference is called a “deficiency.” In North Carolina, the foreclosing party is entitled to collect this amount by suing the borrower to get a deficiency judgment. However, North Carolina has anti-deficiency statutes which prevent the foreclosing party from pursuing a deficiency judgment when the mortgage being foreclosed on:
is a purchase money (seller financed) mortgage (North Carolina General Statutes, Section 45-21.38);
is a nontraditional mortgage (such as an Option ARM loan) or is a rate spread home loan (where the annual percentage rate exceeds a certain threshold); or
is a mortgage securing the borrower’s principal residence (North Carolina General Statutes, Section 45-21.38A).
HOW TO STOP FORECLOSURE IN NORTH CAROLINA
Foreclosures in North Carolina usually take a few months to complete, but you should begin exploring options to stop foreclosure and save your home immediately once you start to fall behind on your mortgage payments.
Here is an overview of possible options to help you stop foreclosure and save your home:
Loan Modification. With a loan modification, you reach an agreement with your mortgage company to change the original terms of your mortgage--such as payment amount, length of loan, interest rate, etc. In most cases, when your mortgage is modified, you can reduce your monthly payment to a more affordable amount.
A loan modification may be an option if:
You are ineligible to refinance
You are facing a long-term hardship
You are several months behind on your mortgage payments or likely to fall behind soon
What are the benefits of a loan modification?
Resolve your delinquency status with your mortgage company
May reduce your monthly mortgage payments to a more affordable amount
Change the original terms of your mortgage permanently, giving you a new start
Less damaging to your credit score than a foreclosure
Stay in your home and avoid foreclosure
How does a loan modification work? A modification involves one or more of the following:
Changing the mortgage loan type (e.g., changing an Adjustable Rate Mortgage to a Fixed Rate Mortgage)
Extending the term of the mortgage (e.g., from a 30-year term to a 40-year term)
Reducing the interest rate either temporarily or permanently
Adding any past due amounts, such as interest and escrow, to the unpaid principal balance, which is then reamortized over the new term
Government Assistance Programs. Government assistance programs, such as Making Home Affordable (MHA) and the Home Affordable Modification Program (HAMP), helped millions of homeowners obtain mortgage relief and avoid foreclosure. Unfortunately, as of December 30, 2016, no new applications or new requests for assistance under any MHA program are being accepted. Although this resource is no longer available to homeowners, help is still attainable. At the direction of the Federal Housing Finance Agency, Fannie Mae has announced the Fannie Mae Flex Modification program which is intended to replace some of the options offered under MHA. Additional government-sponsored assistance programs may be rolled out in the near future.
Forbearance Agreement. Forbearance agreements are typically used when there is a short-term hardship that you will recover from in just a few months. With this option, you reach an agreement with your mortgage company to temporarily suspend or reduce your monthly mortgage payments for a specific period of time. This option lets you deal with your short-term financial problems by giving you time to get back on your feet and bring your mortgage current.
A forbearance agreement may be an option if:
You are ineligible or do not want to refinance
You are facing a temporary hardship
What are the benefits of a forbearance agreement?
Lower or temporarily suspend your monthly payment--giving you time to improve your financial situation and get back on your feet
Less damaging to your credit score than a foreclosure
Stay in your home and avoid foreclosure
How does a forbearance agreement work? A forbearance agreement reduces your monthly mortgage payment--or suspends it completely--during the forbearance period. If you qualify for forbearance, your mortgage company will determine the terms of the forbearance agreement, such as:
Length of the forbearance period
Reduced payment amount or complete suspension of payment
Terms of repayment
Repayment Plan. To help get your mortgage back on track, you might be eligible for a repayment plan. With this option, you reach an agreement with your mortgage company allowing you to repay your past due amount over several months in order to bring your mortgage current.
A repayment plan may be an option if:
You are ineligible or don't want to refinance
You are facing a short-term hardship
You are only a few months behind on your mortgage payments
You can now afford to make your monthly mortgage payment
What are the benefits of a repayment plan?
Bring your mortgage current and resolve your delinquency
Catch up on your past due payments over an extended period of time
Less damaging to your credit score than a foreclosure
Stay in your home and avoid foreclosure
How does a repayment plan work?
If you qualify for a repayment plan, typically your past due amount will be spread out over a set time frame (e.g., 3, 6, 9 months) and added on to your existing mortgage payments. Your mortgage company may have you sign an agreement that will outline how you are going to repay your past due amount, such as the length of the repayment period and other specific terms.
Reinstatement. One way that some homeowners can stop foreclosure and save their home is to bring the loan current by paying all of the missed payments (plus other costs and fees) in one lump sum. This is known as "reinstating" the loan. Paying the reinstatement amount stops the foreclosure. Typically, your mortgage company will let you reinstate the loan at any point prior to the foreclosure sale.
Avoid Foreclosure! Regardless of which of the above options may be right for you, the key to stopping foreclosure is being proactive and acting quickly. Foreclosure can have serious negative consequences on your ability to get new housing, credit, and maybe even potential employment, for many years. Act now and let Dickens Law Group help you learn how you can stop foreclosure and save your home. Contact us today for a FREE CONSULTATION!
You can find additional helpful articles on stopping foreclosure and related topics on the Dickens Law Group Blog.
