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Notice of Default
Q. Does North Carolina require written notice of default and acceleration?
A. Written notification of default and acceleration prior to initiation of foreclosure proceedings is only required as may be set forth in the terms and conditions of the Deed of Trust and Note. However, a hearing to confirm the existence of default and the requisite authority of the Trustee and Lender to proceed with foreclosure is required as the preliminary step to foreclosure. Notice (which includes the nature of the default) of this hearing is required to be served in accordance with state statutes upon the borrower(s), any other person cited in the security instrument as requiring notice, and the current owner(s) of the property being foreclosed upon.
Right of Redemption
Q. Do mortgagors or junior lienholders have a right of redemption in North Carolina?
A. There is no right of redemption in favor of the borrower(s) or junior lienholder(s) in the state of North Carolina.
Appraisal
Q. Is an appraisal required for a foreclosure sale?
A. An appraisal is not required for a foreclosure sale. However, it is strongly recommended to obtain one if the Lender desires to pursue a deficiency judgement after the foreclosure sale.
Assignment of Rent
Q. Are there any specific issues regarding notices of the timing of invoking an assignment of rents?
A. Any issues with regard to invoking an Assignment of Rents should be in accordance with the terms of the Deed of Trust and Note. The Trustee under the Deed of Trust acts on behalf of the Lender in carrying out the assignment and collecting the monies.
Deed in Lieu/Forbearance/Modification
Q. Please list the documents required for a deed-in-lieu, forbearance and loan modification.
A. Required Documents:
- Deed-in-Lieu Warranty Deed-in-Lieu, Owners Affidavit
- Forbearance Forbearance Agreement
- Modification Loan Modification
- For all recommend a letter of intent sent by the Lender to the Borrower(s) with a signature line for the borrower(s) which outlines the terms and conditions that the Lender is agreeing to as a preliminary step to these loss mitigation alternatives
Q. Please explain the process and requirements for each.
A. Deed-in-Lieu
- Process - Obtain a title report to verify no intervening liens; all junior liens must be satisfied for Lender to have clear title to the property; borrower(s) submit executed deed-in-lieu and Owners Affidavit to Lender; Lender records deed-in-lieu and should obtain an Owners Title Policy
- Requirements/Local Issues Normally, the Deed of Trust would automatically merge into the deed-in-lieu (merger of title) creating a "satisfaction" of the Deed of Trust. If the Lender wants to keep the Deed of Trust "active" so that in the event junior liens or other problems are discovered after conveyance it can proceed with a foreclosure under the original Deed of Trust, the Lender must take certain steps to protect against the merger of title. A stipulation against the merger must be placed in the deed-in-lieu and the Deed of Trust must not be cancelled or satisfied of record.
Forbearance
- Process Draft forbearance agreement which should be signed and witnessed by the borrower(s) and the Lender
- Requirements/Local Issues The agreement should only address issues related to repayment of the arrearage within a designated timeframe; it should not attempt to modify the terms of the Deed of Trust and Note (i.e., maturity date, interest rate)
Modification
- Process Obtain title report to verify no intervening liens; if junior liens are discovered, they must be either satisfied of record or subordination agreements should be obtained from the lienholders to avoid jeopardizing the Lenders senior lien position; the modification agreement needs to be recorded and an endorsement to the loan title policy should be issued
- Requirements/Local Issues - None
Taxes Delinquent
Q. Does the State of North Carolina sell tax certificates for delinquent taxes?
A. The county real estate tax offices in North Carolina are prohibited by law from selling tax certificates for delinquent taxes. A statutory lien is placed on the property effective the 1st of the year after the year in which the taxes are due if they remain unpaid. If the tax office decides to foreclose on the tax lien, it must proceed with a standard foreclosure action, including notifying the Lender. Once the foreclosure sale of the tax lien has occurred, the Lender has no right to redeem the property other than by submitting an upset bid during the upset bid period.
State and Local Conveyance Taxes
Q. Are state and local conveyance taxes due in a foreclosure?
A. A transfer, or excise, tax is due on the foreclosure deed unless the property is conveyed to FHA, VA, FNMA or FHLMC. The tax is $2 per $1,000 of the successful bid amount.
Bid Instructions
Q. Please explain the foreclosure bidding guidelines for North Carolina.
A. Bidding instructions should either be debt-plus costs or 100% of the appraised value of the property if a deficiency judgement will be sought. The instructions should be received by our office no later than the day prior to the foreclosure sale. However, we will work with the Lender to coordinate getting bidding instructions and conveying them to the person crying the sale up to an hour before the designated sale time, depending on the county where the property is located. If bidding instructions cannot be delivered until the day of sale, the Lender should contact the foreclosure attorney as soon as possible to determine if the bid can be prepared in time or if the sale should be postponed.
Postponing North Carolina Foreclosures
Q. Please explain postponement of sale guidelines for your State.
A. After the hearing, but prior to foreclosure sale being commenced: the Lender may postpone the sale for "good cause" (i.e., bad weather, illness, no bidders) more than once as long as the sale is not held more than 90 days after the original sale date. A Notice of Postponement must be posted on the Notice of Sale at the courthouse and mailed to the borrower(s) and other required parties. No additional publication is required.
After foreclosure sale has commenced: the sale may be continued after the it has actually started by the person conducting the sale to a designated time between 10:00 a.m. and 4:00 p.m. the next day (other than a Sunday or legal holiday) provided that the person conducting the sale publicly announces the new time.
Q. Can foreclosure action be placed on hold if a forbearance agreement is entered?
A. A foreclosure action can be placed on hold when a forbearance agreement has been entered into as long as the Notice of Hearing has been filed. If the agreement is entered into and the foreclosure placed on hold prior to the hearing having been held, a new hearing date will have to be set and the Notice of Hearing will have to be re-served if the forbearance agreement is subsequently breached. Therefore, there is no actual benefit to the Lender to place the foreclosure on hold under these circumstances.
However, if the agreement is entered into and the foreclosure placed on hold after the hearing has been held and the Order of Foreclosure issued, the Lender will only need to proceed with the posting and publication of the sale and will not have to start the action over if the forbearance agreement is subsequently breached. Therefore, the Lender under these circumstances can benefit from placing the foreclosure on hold in being able to immediately proceed with the foreclosure sale.
Acceptance of money pursuant to the terms of the forbearance agreement while the foreclosure is on hold will not affect the Lenders ability to immediately re-commence the foreclosure action as outlined above provided that the agreement contains a provision that advises the borrower(s) of the Lenders right to begin foreclosure proceedings again without further notice to the borrower(s).
Collection of Attorneys Fees Through the Foreclosure
Q. Are attorney fees collectable after loan has been demanded?
A. Attorney fees are collectable per the terms of the Deed of Trust and Note.
Process Service
Q. Can process be served by a private process company?\
A. Process of service can be performed by a private company if said company has been approved by the county court.
Q. Can a request for a writ of possession be included in the foreclosure complaint?
A. A Writ of Possession must be an action separate from the foreclosure.
The Effect of Bankruptcy on Foreclosure
Q. Will bankruptcy stop a foreclosure action?
A. Bankruptcy will immediately stop the foreclosure action if it is filed at any time before the foreclosure sale and at any time thereafter up through the expiration date of the final upset bid period.
Condominium Liens
Q. Please explain condominium lien priorities in your State
A. For condominiums created after October 1, 1986, condominium liens have priority over all other liens and encumbrances on a unit, including a Deed of Trust, except for liens and encumbrances recording before the docketing of the lien in the Office of the Clerk of the Superior Court. However, the condominium lien is extinguished within 3 years after docketing the lien unless proceedings are instituted to enforce the lien within that timeframe.
Time of Day for Conducting Foreclosure Sales
Q. Does your state have a specified time that foreclosure sales are held?
A. Foreclosure sales are to be held on any day other than Sunday or a legal holiday and between the hours of 1:00 a.m. and 4:00 p.m.
Costs of a North Carolina Foreclosure
Q. What are the typical costs for a North Carolina foreclosure
A. The costs are:
- Sheriffs Sale not applicable
- Trustee Fee as per the terms of the Deed of Trust and Note
- Allowable Attorney Fee FHA $500
- VA $500
- FNMA $500
- FHLMC $500
- Service of Process - $5 per person per address plus certified mail, return receipt costs
- Court Costs - $30 to file the Notice of Hearing plus $.30 per $100 of successful bid (maximum of $200) due only after the foreclosure sale with the filing of the Final Report and Account of Sale
- Title Search - $150
- TSG not applicable
WORKOUTS
Forbearance Plans
Q. Does the agreement have to be recorded and/or filed with the court to preserve any rights?
A. The forbearance agreement does not have to be recorded and/or filed with the local court to preserve any rights.
Q. Must all parties to the note and deed of trust sign the documents?
A. Both the borrower(s) and the Lender should sign the agreement. "Borrower(s)" include all parties who executed the Note and Deed of Trust unless the loan has been assumed as acknowledged by the Lender. In the latter instance, all parties who executed the Assumption Agreement should execute the forbearance agreement.
Q. Is there any state specific language which must be included in the foreclosure agreement?
A. There is no state specific language that needs to be included in the forbearance agreement.
Q. Can the mortgagee continue with the foreclosure in the event of a default?
A. A foreclosure action can be placed on hold when a forbearance agreement has been entered into as long as the Notice of Hearing has been filed. If the agreement is entered into and the foreclosure placed on hold prior to the hearing having been held, a new hearing date will have to be set and the Notice of Hearing will have to be re-served if the forbearance agreement is subsequently breached. Therefore, there is no actual benefit to the Lender to place the foreclosure on hold under these circumstances.
However, if the agreement is entered into and the foreclosure placed on hold after the hearing has been held and the Order of Foreclosure issued, the Lender will only need to proceed with the posting and publication of the sale and will not have to start the action over if the forbearance agreement is subsequently breached. Therefore, the Lender under these circumstances can benefit from placing the foreclosure on hold in being able to immediately proceed with the foreclosure sale.
Modifications
Q. Under what circumstances will a modification jeopardize a Deed of Trust lien priority?
A. The Lender may jeopardize the lien priority of the Deed of Trust any time that the terms are significantly changed so that the mortgage could be viewed as a "new" loan. Unfortunately, it is difficult to anticipate at what point the terms become "significantly changed". If there are no junior liens, the risk of loss of priority is minimal. However, if junior liens are discovered, the Lender should take the following precautions to minimize any potential risk of loss of priority:
- Obtain a pay off and satisfaction of the liens by the borrower as one of the conditions of accepting the modification
- Obtain a subordination agreement from the junior lienholders who will not be paid off
- Obtain an endorsement to the loan title policy to insure that the priority position is protected
Deeds in Lieu of Foreclosure
Q. What documents are required for a deed in lieu?
A. The only documents which are required is the Warranty Deed-in-Lieu and the Owners Affidavit, both of which are executed by the borrower(s). It is also strongly recommended that the Lender obtain an Owners Title Policy.
Normally, the Deed of Trust would automatically merge into the deed-in-lieu (merger of title) creating a "satisfaction" of the Deed of Trust. If the Lender wants to keep the Deed of Trust "active" so that in the event junior liens or other problems are discovered after conveyance it can proceed with a foreclosure under the original Deed of Trust, the Lender must take certain steps to protect against the merger of title. A stipulation against the merger must be placed in the deed-in-lieu and the Deed of Trust must not be cancelled or satisfied of record.
Assumptions
Q. What documents are required for a loan assumption?
A. The only document that is required is the deed of conveyance to the new owners. However, it is recommended that the Lender also (1) prepare an assumption agreement and have it executed by the new owners and (2) include a statement in the conveyance deed that the deed is subject to the loan and that the "grantees" acknowledgement their assumption of the loan.
Title
Q. What type of foreclosure title product is issued in North Carolina?
A. A title summary based on a limited title search (search is performed from the date of the Deed of Trust being foreclosed upon unless otherwise agreed to between the Lender and the foreclosure attorney) is the typical foreclosure title product issued by this office prior to the foreclosure. Owners title policies are issued for FHA and VA loans after the foreclosure sale; they are only issued on conventional loans if requested by the Lender.
Q. What is the average turnaround time for a foreclosure search?
A. The average turnaround time for a foreclosure search is 10-14 days.
Q. What is the cost of the search?
A. The cost of the search is $150 for a limited title search and $250 (or higher, depending on the complexity) for a full search.
Q. What is necessary to start the search?
A. A copy of the Deed of Trust (recorded or unrecorded) is strongly preferred to help start the title search process. However, the minimum requirements would be the name of the current borrower(s), the name of the original lender, the date of the loan, the original loan amount, and the street address (including the county).
Q. What type of title product for workouts of REO is issued?
A. Loan policy endorsements are issued for modifications and Owners Title Policies can be issued for deeds-in-lieu and for properties sold back to the investor at the foreclosure sale (REO).
Q. Is North Carolina a "buyer" or "seller" state?
A. Generally, the lender of the purchaser of the REO performs the closing.
Q. Who records the documents?
A. The foreclosure deeds are recorded by this office (unless the property is sold to a third party, in which case, the deed is forwarded to him/her for recording). Documents which need to be recorded as part of the REO closing are recorded by the closing attorney.
Q. Who is responsible for closing costs?
A. The purchaser is responsible for closing costs.
Q. What is the average time it takes for documents to be recorded with the county recorder?
A. The average time for documents to be recorded in the county records is 2 days to 1 month.
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