Avoiding Foreclosure in North Carolina

by admin on November 24, 2008

Don’t just let the bank take your home.  Avoid excess bank and legal fees.  There are options but you need to ACT FAST!!

INTRODUCTION:

If you have fallen behind on your payments or are facing foreclosure you may qualify for one of several programs that will help you save your home.  When facing this situation it is important that you understand your options.  By law most lenders are required to offer you an alternative to foreclosure and there is absolutely NO reason to pay someone else to help you determine this.  In North Carolina it is against the law for someone acting as a “debt adjuster” to charge you for this service.  Charging a “fee” to help someone work out a loan modification or loan deferment plan is illegal in the state of North Carolina.  Know your options and NEVER pay someone to do something for you that you can do on your own for free.

My objective with this guide is to help you understand the general foreclosure process and to show you some of your potential options.  Remember, the time to act is NOW.  The clock is ticking and ends with a public auction of your home at the courthouse steps.

The Foreclosure Process:

A foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership of the property securing the loan.  The process begins when a borrower defaults on their loan payments and the lender files a public default notice.  Once this happens your situation has now become public record.  You and your family will now be entering a very challenging and possibly overwhelming event in your life.  Ignoring the situation will not help.  Your mailbox will soon be full of letters from people offering to “buy your home quick” or offering “credit counseling”.  Beware, many of these offers are extremely risky.  Once the foreclosure process has begun on your home it can end on one of 4 ways:

1.  You can pay off the defaulted amount, including legal fees, to reinstate the loan during this pre foreclosure process.

2.  You can sell your property and pay off the loan in full allowing you to avoid foreclosure and the negative impact on your credit history.

3.  Your property will be sold at public auction and you will be evicted by the new owners

4.  You may be able to work out a loan modification with your lender which will increase your payments each month until you catch up on the arrearage.

The typical foreclosure process in North Carolina

In North Carolina foreclosures can be handled through either a Judicial or Non-Judicial process. 

Judicial foreclosures go through the courts and usually occur when there are title problems or there is not a power of sale clause in the deed of trust.  Government tax liens also use the Judicial process.  In these cases a lawsuit is filed to obtain a court order of foreclosure and the foreclosure sale process is directed by the court.

The Non-Judicial foreclosure process is the most common in North Carolina.  This occurs when a clause exists in a mortgage that empowers the lender to sell the property if the borrower defaults.  A preliminary hearing is conducted before a power of sale foreclosure can take place.  Not fewer than 10 days before the notice of hearing, the lender mails or personally delivers the amount due plus expenses to the borrower.  After the notices have been issued, the county clerk conducts the hearing to determine whether a foreclosure sale will take place or not. 

The typical foreclosure timeline is 3-4 months.

Notice of Sale Requirements:

If the deed of trust contains a power of sale clause and indicates the time, place, and terms of sale, then the specified procedure must be followed.  A notice of sale must include the names of all parties involved, a legal description of the property along with the date, time and location of the sale.  The notice of sale must be mailed by first class to the borrower, published weekly in a newspaper of general circulation in the subject county for two successive weeks, with the last publication date not less than 10 days before the date of sale as well as posted on the courthouse at least 20 days prior to the date of sale.

The sale is conducted between 10:00am and 4:00pm at the courthouse and the property is sold to the highest bidder.  If the sale is postponed, a notice stating the revised date and time of the sale is posted at the courthouse.

The borrower still has a 10 day right of redemption period after the sale.  Once the foreclosure has started the homeowner can no longer reinstate their loan but must instead pay off the entire amount owed plus any legal fees associated with the sale.  Furthermore, any party may enter an upset bid during that same time by submitting a bid at lease 5 percent higher than the winning bid to the county clerk.  A deposit equal to 5 percent of the bid amount of $750, whichever is greater, is required.  Filing of an upset bid resets the 10 day right of redemption period.  If no bids are placed during the 10 day upset bid period, the property will be considered legally sold to the highest bidder.  If the highest bidder defaults they lose their deposit and a new sale process begins.

If the property sells for less than you owe on your mortgage loan a deficiency judgment could be pursued.  If this happens then you not only lose your home, you could still owe your lender additional money.  During this process there are extensive bank and legal fees that accumulate on top of what you already owe the lender.

What YOU can do to stop the foreclosure process!!

1.  Stay in constant communication with your lender and be honest with them about your situation

2.  Do you not abandon your home.  You may not qualify for assistance once you leave your home

3.  Be careful and watch out for scams.  Never sign documents that you do not fully understand.  Always ask questions and have an attorney review any documents that you do not understand.

4.  Signing over the deed to your home does not relieve you from paying your mortgage

5.  Forbearance Agreement.  Your lender may be able to offer a re-payment plan based on your financial situation and may even provide for a temporary reduction or suspension of your monthly payments.  You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses.  Your lender may have a package that you will need to complete for such a program.  You must furnish the information they need to meet the requirements of the new re-payment plan.  Other alternatives include a short term payment plan to cover the deficit or adding the unpaid balance to your principal.  This agreement can sometimes take 30-60 days to work out so don’t wait until the last minute.

6.  Modification Agreement.  If your loan is a VA or FHA insured loan, your lender may be able to work with you to obtain a one-time payment from the VA or FHA to bring your loan back to a current status.  There are several qualifications you will have to meet.  You should contact the VA or FHA immediately to investigate this option.  They will tell you if you qualify and help provide assistance with your current situation.  They may also have additional solutions to help save your home, or provide funds.  With a Partial Claim, your lender will receive the amount necessary to bring your mortgage current and a lien is placed on your property until that amount is paid back in full.  This loan is usually interest free and can be paid once the property is sold.

7.  Partial Claim Option.  If your loan is a VA or FHA insured loan, your lender may be able to work with you to obtain a one-time payment from the VA or FHA to bring your loan back to a current status.  There are several qualifications you will have to meet.  You should contact the VA or FHA immediately to investigate this option.  They will tell you if you qualify and help provide assistance with your current situation.  They may also have additional solutions to help save your home, or provide funds.  With a Partial Claim, your lender will receive the amount necessary to bring your mortgage current and a lien is placed on your property until that amount is paid back in full.  This loan is usually interest free and can be paid once the property is sold.

8.  Pre Foreclosure Sale Option.  This option allows you to avoid foreclosure by selling your property before the foreclosure process is complete.  In some cases, you Will be allowed to sell the home for less than the amount owed on the mortgage (short sale).  you or the purchasing party will need to contact your bank to request a short sell package.  To qualify, your loan must be at least two months in default and you must be able to sell your house within less than 5 months.  Other qualifications may apply.

9.  Died in Lieu.  As a last resort, your lender may allow you to voluntarily “give back” your property to the lender.  This will not save your house but is less damaging to your credit and will help you in the long run.  this will also prevent you from being subject to a deficiency judgment.

10.  Short Sale.  In a short sale the borrower makes an agreement with an investor to sell the home for less than is actually owed, subject to approval of the lien holders.  This always results in no cash to the homeowner but will be better for his credit than a completed foreclosure.

11.  Bankruptcy.  Filing for bankruptcy immediately stops the foreclosure process.  Consult an attorney to determine if bankruptcy might be an option for you.

12.  1-888-998-HOPE.  HUD approved counselors to help you work out loan modifications with your lender.

13.  Produce The Note.  In some states, a lender can foreclose on your home without going to court.  These are called non-judicial foreclosure states.  You can still use the Produce the Note strategy in these states, but it takes a few more steps on your part.

First, the concept behind “Produce the Note” is this:  When a homeowner is faced with a foreclosure suit, “Produce the Note” requires the lender to prove it has the actual authority to foreclose, by requiring it to officially produce the original promissory note in the lawsuit. But if there is no foreclosure lawsuit, what can homeowners do?  In these “Non Judicial” states, such as North Carolina, the homeowner has to file a lawsuit against the party trying to foreclose.

Here’s how it generally works:

  • In a state with nonjudicial foreclosure procedures, a foreclosure sale can be initiated by the lender without using court proceedings.
  • Homeowners receive a “Notice of Intent” letter informing them that a foreclosure sale will be scheduled unless the overdue debt is paid within a certain amount of time.
  • If the debt is not paid accordingly, a “Notice of Sale” is then sent informing the homeowner that a foreclosure sale will take place at a particular time and place.
  • No lawsuit is ever initiated by the lender and the courts are not involved.
  • Without a lawsuit, you cannot use judicial procedures to require the lender to “produce the note.”
  • Merely sending a private letter to the lender “demanding” that it produce the original note to the borrower may be met with utter disregard or outright refusal by the lender.

So, here’s what you can do:

  • In a nonjudicial foreclosure state, in order to protect yourself by demanding that the lender “produce the note,” it will be necessary for you to first actually file your own lawsuit. Even in such nonjudicial foreclosure states, no law prohibits you from instituting your own lawsuit challenging the right of a lender to foreclose on your property.   The lawsuit would allege that:
  1. the lender has sent a Notice of Intent to Foreclose;
  2. the homeowner is unsure as to whether the lender still possesses the original debt instrument, upon which the lender claims the right to foreclose;
  3. the homeowner wants proof of such authority; and
  4. the court should intervene and prevent the foreclosure from taking place unless and until such proof is presented.