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Mortgage Foreclosure Issues in North Carolina and Alternatives

Over the last five years, the concept of foreclosure has crept into millions of homes in the United States. During that time, the concept of foreclosure became a reality for so many homeowners who would have never, in a million years, thought they would have been subject to foreclosure. Whether by a bad loan they signed during the economic upswing, whether by the realization that their home is worth a fraction of what is owed on the mortgage, or whether it is a byproduct of a debtor losing their job, the reality of foreclosure has been a wake-up call for many. In North Carolina, the vast majority of foreclosures are founded on North Carolina Gen. Statutes, Article 45. The law generally allows a creditor to take back possession of its collateral (your home) when there is a default on the mortgage.

The Foreclosure Hearing

In North Carolina, a bank that wishes to foreclose on a debtor must request a hearing in front of the clerk of court in the county where the home is located. The homeowner is sent notice of this hearing so that the homeowner may have an opportunity to appear. The unfortunate news for many homeowners is that the burden that the lender caries is quite low. To paraphrase, the Lender need only show the clerk that they hold a valid note, a “power of sale” provision in the deed of trust, that the homeowner was notified of the hearing, and lastly, that there is a default. It is nearly certain that the first three prerequisites will be a given; those are all administrative checkmarks which are nearly certain present. The only real question is default. For many homeowners who have received notice of foreclosure and gotten to the stage of the hearing, it is very likely that they themselves recognize a default has occurred. In many instances, the homeowner is attempting and modification with the mortgage company or some other type of alternative to foreclosure, such as a short sale or deed in lieu of foreclosure. It is surprising for many of our clients that the mortgage company will often continue to pursue foreclosure at the same time as it is discussing with you the potential for modification. This realization is extremely frustrating for those homeowners who are facing foreclosure in working diligently to try to avoid it. Unfortunately, there is not much recourse against the bank for doing both simultaneously.

The Foreclosure Sale

At the foreclosure hearing, should the lender show the aforementioned four items then the clerk of court will likely allow the property to be sold. However, the property is not sold that day. The property is generally sold no less than 20 days after that hearing, since North Carolina law requires publishing time periods before the sale to commence. Furthermore, even when the foreclosure sale is complete, North Carolina law also provides a 10 day upset bid period. An upset bid period is a statutory time period in which anyone can place a bid to purchase the property, including the homeowner. Any subsequent bid will allow an additional 10 day upset bid period. Theoretically, a foreclosure sale could go on for months and years if reoccurring upset bids were placed.

Alternatives to Foreclosures

Many homeowners who face the reality of foreclosure must recognize the inevitability that their house will be taken from them since they have not paid the mortgage. There are alternatives to foreclosure. As mentioned previously, some banks will allow modifications, deeds in lieu of foreclosure, and short sales. Those alternatives may have consequences in themselves that an experienced attorney can help explain. Lastly, a homeowner can file a Chapter 13 bankruptcy in order to stop the foreclosure and setup a payment plan wherein the homeowner will have the opportunity to pay back all missed payments while maintaining their current monthly payments. It is good news for many homeowners to learn that a chapter 13 bankruptcy can be filed even after the foreclosure sale so long as it is done before the expiration of the 10 day upset bid period.

The experience attorneys at Arnold & Smith, PLLC can help explain all options available to a homeowner who is facing foreclosure. Whether it be dealing with a foreclosure, alternatives to foreclosure, or even a chapter 13 bankruptcy, we have helped clients for nearly a decade navigate the often scary and complicated process. If you would like set up an appointment with one of our attorneys, please contact us. We look forward to assisting you.