North Carolina Foreclosure Process
What Happens When You Fall Behind in a Few Payments
If you miss a few mortgage payments, your servicer will probably send a letter or two reminding you to get caught up, as well as call you to try to collect the payments. Don’t ignore the phone calls and letters. This is a good opportunity to discuss loss mitigation options and attempt to work out an agreement—like a loan modification, forbearance agreement, and payment plan—so you can avoid foreclosure.
Pre-foreclosure Loss Mitigation Review Period
Under federal mortgage servicing law, the servicer must generally wait until you are 120 days' delinquent on payments before making the first official notice or filing for any nonjudicial or judicial foreclosure. This time period is supposed to give you sufficient opportunity to explore loss mitigation opportunities.
Get out your mortgage docs… You are going to need them
North Carolina is a power of sale foreclosure jurisdiction state.
This means that a lender seeking foreclosure does not have to go through a long judicial process in order to take possession of the collateral (your house). Lenders in North Carolina may foreclosure through a private sale process or nonjudicial.
Power of sale foreclosure usually happens much faster than judicial foreclosure, however, foreclosure under a power of sale is permitted only where the mortgage document specifically grants such a right. In most cases, your lender will have this covered, but it’s worth double checking to make sure they included a power of sale provision.
Because this is a non-judicial remedy there are very stringent notice requirements and the legal documents are required to contain the power of sale language in order to use this type of foreclosure method
45-Day Pre-foreclosure Notice
At least 45 days before filing of a notice of hearing in a foreclosure proceeding on a primary residence, the servicer must send a notice to the borrower that includes the following information (among other things):
The past due amount and other charges that must be paid to bring the loan current
Contact information for the mortgage lender, the servicer, or an agent who is authorized to work with the borrower to avoid foreclosure
Contact information for a HUD-approved housing counseling agency. (N.C. Gen. Stat. § 45-102).
Notice of Default
The lender must send a notice of default, which includes a detailed statement of amounts due along with a daily interest charge (based on the contract rate as of the date of the statement), to the borrower within 30 days of the date of the notice of hearing. (N.C. Gen. Stat. § 45-21.16(c)(5a)).
PRE-SALE HEARING
In North Carolina, foreclosure under a power of sale must be preceded by a pre-sale hearing before the clerk of the court in the county where the property is located.
This is essentially an administrative requirement put in place to ensure that the relatively quick power of sale process is not abused. The trustee (or lender) is required to give notice of the pre-sale hearing (usually via a mailed form letter) to all interested parties not less than 10 days prior to the date of the pre-sale hearing.
At the pre-sale hearing the clerk of the court will limit its review to only four issues:
i.
Is there a valid debt?
iii.
Does the mortgage authorize foreclosure by power of sale?
ii.
Has there been a default?
iv.
Has proper notice been given to interested parties?
Notice of Sale
At least 20 days before the sale, a copy of the notice of sale must be:
sent to the borrower, and
posted in a public place. (Typically, the notice is posted at the courthouse immediately after the hearing).
The notice of sale must be published once a week for at least two successive weeks in a newspaper in the county in which the property is situated, with the last publication being not more than ten days before the sale. (N.C. Gen. Stat. § 45-21.17).
Reinstatement Before Sale
There is no statutory right to reinstate the loan prior to the sale in North Carolina. But most deeds of trust, like the conventional FNMA (Fannie Mae)/FHLMC (Freddie Mac) deed of trust, provide the borrower the right to cure the default after acceleration and reinstate the loan, usually up to five days prior to the foreclosure sale.
The Foreclosure Sale
foreclosure sale, the property will be:
sold to the highest third-party bidder, or
sold to the foreclosing lender and become REO.
Deficiency Judgment Following Sale
In a foreclosure, the borrower's total debt sometimes exceeds the foreclosure sale price. The difference between the sale price and the total debt is called a "deficiency." In some states, the lender can seek a personal judgment, called a "deficiency judgment," against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount from the borrower using regular collection methods, like a wage garnishment or bank levy.
In North Carolina, no deficiency judgment is allowed if the loan was a purchase money, seller financed mortgage or deed of trust. (N.C. Gen. Stat § 45-21.38).
The lender might also be barred from seeking a deficiency judgment after foreclosure if:
the mortgage loan is nontraditional (like a loan that permits the borrower to defer payment of principal or interest and allows negative amortization of the loan balance) or is a rate spread home loan (where the annual percentage rate exceeds a certain threshold), and
the mortgage loan secures borrower’s principal residence. (N.C. Gen. Stat. § 45-21.38A).
Right of redemption in North Carolina
North Carolina has a very short statutory right of redemption, which would allow a party whose property has been foreclosed to reclaim that property by making payment in full of the sum of the unpaid loan plus costs within ten (10) days of the sale through the upset bid process, where any bidder can increase the sale bid by 5% in order to become the winning bidder at the sale.