If you're a homeowner in North Carolina facing the scary prospect of losing your home to foreclosure, don’t be caught off guard. In this article, you’ll find details each step in a North Carolina foreclosure—from missing your first payment all the way to eviction—with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea. Also, how courts and agencies interpret and apply the law can also change. And some rules can even vary within a state. These are just some of the reasons to consider consulting a foreclosure attorney if you're behind in your loan payments.
When you take out a loan to buy residential property in North Carolina, you typically sign a promissory note and a deed of trust, which is similar to a mortgage. A promissory note is basically an IOU that contains the promise to repay the loan, as well as the terms for repayment. The deed of trust provides security for the loan that is evidenced by a promissory note. (Find out more in our article What’s the Difference Between a Mortgage and a Promissory Note?)
If you miss a payment, most loans include a grace period of fifteen days after which time the loan servicer will assess a late fee.
The late fee is generally 4% of the overdue payment of principal and interest based on the terms of the note. To find out the late charge amount and grace period for your loan, look at the promissory note that you signed. This information can also be found on your monthly mortgage statement. (Read more about fees that the lender can charge if you’re late on mortgage 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.
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.
In North Carolina, most residential foreclosures are nonjudicial. This typically means the lender can foreclose without going to court so long as the deed of trust contains a power of sale clause. Though, North Carolina nonjudicial foreclosures usually involve one court hearing (see below).
At least 45 days before starting a foreclosure, the servicer must send a notice to the borrower that includes the following information (among other things):
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]).
A notice of hearing to show cause as to why the foreclosure should not be allowed to proceed must be served to the borrower:
At the hearing, the court will consider certain issues, like whether the debt is valid and the foreclosing party is the holder of the debt, if the homeowner is actually in default, whether foreclosure is allowed under the deed of trust, and whether proper notice was given.
The clerk can decide to postpone the hearing (for no more than 60 days) if:
If a postponement isn’t warranted and the lender followed certain procedural steps, the clerk will authorize a foreclosure sale.
At least 20 days before the sale, a copy of the notice of sale must be:
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).
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.
At the foreclosure sale, the property will be:
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:
Find out more about Deficiency Judgments After Foreclosure in North Carolina.
A redemption period is the legal right of a borrower in foreclosure to pay off the total debt, including the principal balance, plus certain additional costs and interest, to reclaim the property. Paying off the debt is called "redeeming" the property.
North Carolina provides an upset-bid period that initially lasts for ten days after the report of sale is filed. (After the foreclosure sale, another buyer can come in and buy the home by making a higher bid than was bid at the sale. This kind of bid is called an "upset bid." Once an upset bid is made, it starts a new 10-day upset-bid period.) During the upset-bid period, the borrower has the right to pay the debt in full and redeem the property. (N.C. Gen. Stat. § 45-21.20).
The borrower may also redeem before the foreclosure sale.
If you don’t vacate the property following the foreclosure sale, the new owner will likely:
If you have questions about the foreclosure process in North Carolina or want to learn about potential defenses to a foreclosure, consider talking to a foreclosure attorney. It’s also a good idea to talk to a HUD-approved housing counselor, especially if you want to learn about different loss mitigation options.