North Carolina Power of Sale Foreclosure Procedure
Pre-Foreclosure Notice G.S. 45-102 and G.S. 53-244.111 require that the servicer/noteholder mail a preforeclosure notice to the borrower s last known address at least forty-five (45) days before filing a foreclosure action. Pursuant to G.S. 45-105, the North Carolina Commissioner of Banks (NCCOB) can extend the earliest filing date of our foreclosure action by thirty (30) days if the Commissioner reasonably believes, based on a full review of the loan information, the mortgage servicer s loss mitigation efforts, the borrower s capacity and interest in staying in the home, and other appropriate factors, that further efforts by the State Home Foreclosure Prevention Project offer a reasonable prospect to avoid foreclosure on primary residences. Once the pre-foreclosure period has expired, we can proceed.
Documents Needed at Referral Copy of Recorded Deed of Trust (DOT) Copy of Note with Indorsements Copy of Title Policy Copy of Assignments/Allonges Copy of Appraisal NCGS 45-93 Written Compliance response Payoff figures for NCGS 45-21.16(c)(5a) notice * This letter also includes the Fair Debt Collection Practices information. Home Loan/Non-Home Loan Certificate, if applicable 45 day pre-foreclosure notice and/or 30 day breach letter If our office sends the 45-day pre-foreclosure notice for you, we need a reinstatement figure.
Substitution of Trustee (SOT) Before we can file our Notice of Hearing, the SOT must be executed by a chairman, president, chief executive officer, vice-president, assistant vicepresident, treasurer, or chief financial officer of the note holder or the attorney-in-fact for the note holder and must be recorded with the Register of Deeds Office in the county in which the property being foreclosed is located. If a person with any other title (i.e., Asst. Secretary) executes the SOT, we must have an original or a certified copy of the corporate resolution allowing this person to execute SOTs on behalf of the note holder so we can record the resolution in North Carolina.
Notice of Hearing (NOH) First legal document we file with the Clerk of Superior Court to begin a power of sale foreclosure action in North Carolina. The filing fee is $150.00. The NOH must be served on: - Any person that the deed of trust directs notice to be sent in the case of default; - Any person obligated to repay the indebtedness against whom the holder intends to assert liability for any deficiency (i.e., guarantor); and - Every record owner of the real estate whose interest is of record in the county where the real property is located at the time the NOH is filed in that county (does not include: holder of a senior or junior deed of trust, judgment, mechanic s or materialman s lien, or other lien or security interest in the real property).
Service The Notice of Hearing (NOH) must be served on all parties in accordance with Rule 4 of the N.C. Rules of Civil Procedure. We attempt service on each party by U.S. Certified Mail, return receipt requested at the property address and mailing address, if different, and by asking the Sheriff to personally serve each party. If after a due and diligent search, the Sheriff is unable to locate the person to be served in the county in which the property is located, the Sheriff will post a copy of the NOH on the front door of the property being foreclosed. If we rely on posting as our method of service, the NOH must be posted on the property at least 20 days prior to the hearing, which cannot include the day of posting or the day of the hearing. If we obtain personal service (i.e., certified mail, UPS, or Sheriff), the NOH must be served on the party at least 10 days prior to the hearing.
Response to NOH Any party to the foreclosure action may appear at the foreclosure hearing before the Clerk of Court and contest the holder s right to foreclose. A party contesting the foreclosure is NOT required to file any formal pleading in N.C. The person may simply appear at the hearing and state that he/she is contesting the foreclosure.
Clerk of Court The Clerk of Court is the judicial officer that presides over power of sale foreclosure actions in N.C. The Clerk of Court is an elected official. The Clerk of Court is not a lawyer in the vast majority of the counties in N.C.
State Home Foreclosure Prevention Project Extension Eliminates the distinction between a non-subprime and a subprime loan. Beginning 11-1-10, servicers are required to register all home loans on the North Carolina Commissioner of Banks (NCCOB) database, regardless of origination date, within 3 business days of mailing the pre-foreclosure notice to the borrower. Beginning 9-16-10, when registering a loan on the database, you must have completed the due date of last scheduled payment made field. At the time a loan is registered on the database, the servicer will have to pay a one-time for the life of the loan fee of $75.00.
Home Loan definition Borrower is a natural person, debt is incurred primarily for personal, family or household use, and the loan is secured by property that is or will be occupied by the borrower as the borrower s principal residence. Excludes: Equity Lines, Construction Loans, Reverse Mortgages, Bridge Loans with a term of 12 months or less, Commercial Loans, Loans that Exceed the Conforming Loan Size Limit for a Single-Family Dwelling as established by Fannie Mae, and Loans Secured by Property that is NOT the Borrower s Principal Dwelling (vacation home, rental property).
N.C. Home Loan Requirements If the loan is not exempt from the home loan definition set forth in G.S. 45-101(1b), we need either the: - Non-Home Loan Certificate or - The Conditional Certificate of Compliance. If the loan is a home loan, G.S. 45-103 requires that the loan be registered on the NCCOB database within 3 business days of the date the pre-foreclosure notice was mailed to the borrower. This law went into effect on November 1, 2010.
Affidavit of Indebtedness This is the Affidavit that you execute for us and that we present to the Clerk of Court to prove: That the entity that we are foreclosing in the name of is the holder of the Note and Deed of Trust as that term is defined in the Uniform Commercial Code; That the loan is in default and has been accelerated; That there is a power of sale provision in the Deed of Trust; That you have made attempts to work towards a loss mitigation resolution to the default with the borrower if the property being foreclosed is the borrower s primary residence; and That the loan is not a home loan under North Carolina law or that it is a home loan and you have complied with North Carolina s requirements regarding home loans.
N.C.G.S. 45-21.12A This statute was passed by the N.C. legislature to complement the provisions of the federal Servicemembers Civil Relief Act, 50 U.S.C. App. 501, et seq. ( SCRA ). The foreclosure prohibition is only applicable to loans that were originated BEFORE the borrower s period of military service. If the borrower was in the military at the time of loan origination, this law is not applicable and there will be no delay in the foreclosure process. If the borrower was not in the military at the time of loan origination, and subsequently goes on active duty, this law prohibits the Clerk of Court from holding a foreclosure hearing during, or within 90 days after, a period of military service. This law became effective on January 1, 2011 and applies to foreclosures initiated on or after that date. Our office conducts a military search and executes an affidavit stating that the foreclosure is not prohibited by this statute.
Hearing before the Clerk of Court To authorize the foreclosure sale, the Clerk must find the existence of: 1. A valid debt of which the party seeking to foreclose is the holder; 2. Default; 3. Right to foreclose under the instrument; 4. Notice to those entitled to notice; 5. That the underlying mortgage debt is not a home loan as defined in G.S. 45-101(1b), or if the loan is a home loan under G.S. 45-101(1b), that the pre-foreclosure notice under G.S. 45-102 was provided in all material respects, and that the periods of time established by Article 11 of Chapter 45 of the General Statutes have elapsed; 6. That the property is occupied by the borrower as his/her principal residence and the lender has complied with the requirements of G.S. 45-21.16C or that the property is not occupied by the borrower as his/her principal residence and therefore G.S. 45-21.16C is inapplicable; and 7. That the sale is not barred by G.S. 45-21.12A.
Contested Issues/Appeals 2 issues that are contested most often are: Whether the party seeking to foreclose is the holder of the Note; and Whether the borrower is in default. In North Carolina, the amount of the default is not relevant for a Clerk s foreclosure hearing. If the borrower is $1.00 behind, the Clerk shall enter the Order allowing the foreclosure sale to proceed.
Contested Issues/Appeals (cont.) Appeals of the Clerk s Order authorizing a foreclosure sale are made to a Superior Court Judge (trial court level). The Judge is limited to the same 7 findings that were before the Clerk of Court. If the borrower appeals, he must post a bond adequate to protect the holder from any probably loss by reason of appeal in order to stop the foreclosure sale from taking place. If he does not post the bond, the sale can still take place and the appeal will be moot when the appeal hearing takes place. If the property is the borrower s primary residence, the bond shall be 1% of the principal balance due on the Note. The Clerk has the discretion to set the bond at a higher or lower amount for other good cause shown.
G.S. 45-21.16C G.S. 45-21.16C provides the Clerks with the authority to continue a foreclosure hearing for up to 60 days if the residence being foreclosed is the borrower s principal residence and the Clerk determines there is good cause to believe that additional time or additional measures have a reasonable likelihood of resolving the delinquency without foreclosure.
G.S. 45-21.16C (cont.) In determining whether good cause exists, the Clerk may consider 4 factors: 1) Whether the mortgagee, trustee or loan servicer has offered the borrower an opportunity to resolve the foreclosure through forbearance, loan modification or other commonly accepted resolution plan appropriate under the circumstances. 2) Whether the mortgagee, trustee, or loan servicer has engaged in actual responsive communication with the borrower, including telephone conferences or in-person meetings with the borrower or other actual two-party communications. 3) Whether the debtor has indicated that he or she has the intent and ability to resolve the delinquency by making future payments under a foreclosure resolution plan. 4) Whether the initiation or continuance of good faith voluntary resolution efforts between the parties may resolve the matter without a foreclosure sale. Notably, the Clerk also has the authority to continue the hearing for other good cause shown.
Notice of Sale A copy of the Notice of Sale is posted at the courthouse immediately after the hearing before the Clerk of Court takes place. We send a copy of the Notice of Sale by First Class Mail to the following: Any person who has filed a Request for Notice (RFN). A person that has filed a RFN is entitled to notice of the sale at least 20 days prior to the sale taking place. Current Occupant. The current occupant of the property must be given 20 days notice of the sale of the property. Large Judgment. If there is a large judgment, we send a copy of the Notice of Sale to the judgment holder. Junior Lienholder. We send a copy of the Notice of Sale by U.S. Certified Mail, return receipt requested to the IRS. If an IRS lien was filed 30 or more days prior to the sale date, we are required to provide the IRS with notice of the sale at least 25 days prior to the sale date.
Publication The Notice of Sale must run in the newspaper for 2 consecutive weeks and the period of time from the date of first publication to the date of the last publication, both days inclusive, shall not be less than 7 days. The last publication date CANNOT be more than 10 days before the sale.
Notice of Hearing (NOH) First legal document we file with the Clerk of Superior Court to begin a power of sale foreclosure action in North Carolina. The filing fee is $150.00. The NOH must be served on: - Any person that the deed of trust directs notice to be sent in the case of default; - Any person obligated to repay the indebtedness against whom the holder intends to assert liability for any deficiency (i.e., guarantor); and - Every record owner of the real estate whose interest is of record in the county where the real property is located at the time the NOH is filed in that county (does not include: holder of a senior or junior deed of trust, judgment, mechanic s or materialman s lien, or other lien or security interest in the real property).
Sale The sale takes place at the courthouse. If a third party bidder is the high bidder, he is required to deposit 5% of his bid in certified funds with the person holding the sale. We generally give a third party bidder 30 days to pay the full balance of his bid. There is a 10 day redemption and upset bid/confirmation period in N.C. that run concurrently. A sale is not confirmed until there have been 10 consecutive days with no upset bids having been filed. Once the sale has confirmed, the rights of the parties become fixed and the purchaser is entitled to a Trustee s Deed upon payment of the balance of the bid.
Sale Redemption: During this 10 day period, the borrower has the right to pay the loan in full and redeem the property. Upset Bid: During this 10 day period, any person may file an upset bid with the Clerk of Court. The upset bid must be at least 5% more than the last bid and the person placing the bid must deposit 5% of his bid with the Clerk s office. The 10 day period starts over again after each upset bid is placed and continues until 10 consecutive days have passed without an upset bid having been filed.
Sale Postponements We can postpone a sale for up to 90 days from the original sale date in any increment of time (i.e., 2 days, 2 weeks, 30 days). We do not have to republish the Notice of Sale if the sale is postponed. Each postponement costs $150.00, because we have to appear in person at the courthouse and publicly announce the sale postponement on the day and at the time the sale was originally supposed to take place.
Placing a File on Hold vs. Closing The Administrative Office of the Courts in North Carolina issued a memorandum to the Clerks of Court which states that the Clerks cannot place a case on "inactive status" or hold because the borrower is negotiating a repayment or other workout plan. If you ask our office to place a file on "hold" for loss mitigation and the Order authorizing the foreclosure sale has NOT been entered by the Clerk, we must dismiss the foreclosure proceeding. If you ask us to place a file on "hold" AFTER the Clerk has entered the Order authorizing the foreclosure sale, we will place the file on hold as long as possible until we receive a clean-up calendar from the Clerk s Office. At that time, we will ask you whether you want us to proceed with the foreclosure sale or dismiss the foreclosure proceeding.
Borrower Request for Information G.S. 45-93 The North Carolina Mortgage Debt Collection and Servicing Act became effective on April 1, 2008. Within 10 business days of receipt of the borrower s request for information, the servicer must provide the borrower (or his attorney if represented) with a statement which includes the following information: Whether the account is current and if not, an explanation of the default and the date the account went into default; The current balance due on the loan, including the principal due; The amount of funds (if any) held in a suspense account; The amount of the escrow balance (if any) known to the servicer; Whether there are any escrow deficiencies or shortages known to the servicer; The identity, address, and other relevant information about the current holder, owner, or assignee of the loan; and The telephone number and mailing address of a servicer representative with the information and authority to answer questions and resolve disputes.
Borrower Request for Information G.S. 45-93 (cont.) Within 25 business days of the date of the borrower s request for information, the servicer must provide the borrower (or his attorney if represented) with: Copy of the original note or affidavit of lost note; and Full payment history, including escrow and suspense account activity. The history shall include a minimum two-year period prior to the date of the receipt of the request for information. If the servicer claims that any delinquent or outstanding sums are owed on the home loan prior to the 2-year period, the servicer shall provide an account history beginning with the month that the servicer claims any outstanding sums are owed on the loan up to the date of the request for information.
NCCOB Rule 702 Under this rule, mortgage servicers must: (1) Acknowledge, in writing, a borrower s request for loss mitigation no later than ten (10) business days after the request. The acknowledgement must identify with specificity any information needed from the borrower in order for the servicer to consider the borrower s Loss Mitigation Request ( LMR ). For purposes of this Rule and Rule 703, a LMR is considered received by a servicer upon the borrower or the borrower s agent contacting the servicer at the address, phone or other contact information required to be provided to borrowers in a notice complying with G.S. 53-244.111(22) which is the 45-day pre-foreclosure notice statute.
NCCOB Rule 702 cont. (2) Respond to a loss mitigation request from a borrower no later than thirty (30) business days after the receipt of all information necessary from the borrower to assess whether or not a borrower qualifies for any loss mitigation programs offered by the servicer. **This response should be an approval, denial, or an update. If you have not received investor approval yet and so you cannot provide a final response (approval or denial), please be sure that you send a letter to the borrower within the 30 business day time period providing the borrower with an update on the status of his/her request and notifying the borrower that the foreclosure action will remain on hold until you can provide the borrower with a final response which will be an approval or denial of the borrower s LMR.
NCCOB Rule 702 cont. (3) Include in a final response denying a loss mitigation request the reason for the denial and contact information for a person at the servicer with authority to reconsider the denial. In addition, the denial shall also include the following statement in boldface type and in print no smaller than the largest print used elsewhere in the main body of the denial: If you believe the loss mitigation request has been wrongly denied, you may file a complaint with the North Carolina Office of the Commissioner of Banks website, www.nccob.gov.
NCCOB Rule 703: Cessation of Foreclosure Activity Under this rule a servicer is prohibited from initiating or furthering a foreclosure proceeding or imposing a charge incident to a foreclosure proceeding during the pendency of a Loss Mitigation Request.
NCCOB Rule 703 cont. This requirement would NOT apply if: The borrower has failed to comply with the terms of a loss mitigation plan within the previous 12 months, if the loss mitigation plan: (a) was implemented pursuant to a federal or state foreclosure prevention program, including the Home Affordable Modification Program; or (b) reduced the monthly payment of the loan by 6% from the scheduled monthly payment and resulted in a monthly payment of principal, interest, taxes, and insurance of less that 31% of the borrower s household income; The servicer has provided a final response regarding a loss mitigation request within the last 12 months and reasonably believes that the current loss mitigation request was not made in good faith; The borrower has failed to comply with a Chapter 13 bankruptcy repayment plan or has any bankruptcy proceedings dismissed for abuse of process within the last 12 months; The loss mitigation request is received by the servicer after the time for appealing an order granting foreclosure of the secured residential real estate has passed in accordance with Article 2A of Chapter 45 (the borrower has 10 days from the date the Clerk enters an Order authorizing the foreclosure sale to appeal); The servicing contract or the terms of the mortgage loan, entered into prior to October 1, 2009, prohibits such a delay.
NCCOB Rule 703 cont. Upon receipt of a LMR you need to determine whether one of these exceptions applies and whether a foreclosure action has been filed. Detailed notes regarding this determination should be made a part of the loan notes (date of receipt of LMR, date determination made regarding whether this loan is exempt from Rule 703, determination, and date/description of notifications sent to the borrower). If an exception applies, you can send a letter to the borrower which is both an acknowledgement and denial, provide a copy to your foreclosure counsel, close the LMR process on this loan, and proceed with foreclosure. If no exceptions are applicable, you need to advise foreclosure counsel immediately of the LMR and place the file on hold. No charges incident to a foreclosure may be imposed during the pendency of a LMR.
Differences in the N.C. and S.C. foreclosure process Assignments are not required in North Carolina and do not have to be recorded. In North Carolina, we only have to prove the holder of the Note, not the owner of the Note. In North Carolina, our office controls the sale and any postponements thereof, not the court. Sales can be conducted any day of the week, not just one day a month. We also execute the Trustee s Deed conveying the property to the high bidder once the sale confirms. In North Carolina, no original documents are required unless the hearing is contested and one of the issues in dispute is whether the entity that we are foreclosing in the name of is the holder of the Note. In North Carolina, affidavits of indebtedness are required to be filed in all 100 counties in the State and do not contain an itemized breakdown of the amount owed. The affidavit only contains the current principal balance and the date of the last paid installment. In North Carolina, we do not have mediation, nor do we need a HAMP certification to file our first legal. In North Carolina, we cannot obtain a deficiency judgment as part of the foreclosure proceeding. In North Carolina, we utilize posting rather than publication if we cannot obtain personal service of the NOH.