What is the Foreclosure Process in North Carolina?
Updated: Jan 20
Many are predicting that in the wake of the coronavirus pandemic foreclosures will drastically increase. This post explains North Carolina foreclosure proceeding from start to finish in the hope of providing homeowners with information on what to expect if they are faced with mortgage troubles.
First, the basics. When you get a mortgage on your home, you are actually signing two documents: the note, and the deed of trust. The note is, more or less, just like any loan document. It says you are borrowing money, how much, and the terms for repayment.
The deed of trust is security for your payments under the note. It allows the lender to foreclose if you do not make payments. It is an agreement between you, the lender, and a third party, a trustee. The trustee is a neutral third party who files the foreclosure if you do not make payments.
Most of us like to think that once we “buy” a house, we own it. The technicalities of are not quite that simple. Until you pay off the loan you do not really own the house. North Carolina is what is called a “title theory” state. This means that even though you are on the deed, it’s your lender who really owns the property until the loan is paid off. You have the exclusive right to possession – for example, the lender cannot just walk in – but the owner in a legal sense is still the bank. Why does all this about a “title theory” matter? Because it determines how the foreclosure proceeding is conducted.
Here are the steps in a foreclosure in North Carolina
If you fall behind on your mortgage payments, the first thing you’ll receive is a notice of default telling you that you have defaulted (i.e., not complied with) the terms of your loan.
Next, the lender will send a notice of acceleration. Acceleration is when the entire loan comes due at once. There must have been a default before the lender can do this.
A notice of foreclosure hearing is then scheduled with the Clerk of Court for the county where the house is located. A hearing will be scheduled.
The notice of foreclosure hearing will be served on you by the County Sheriff, or sometimes is sent by certified mail. It must be served at least 10 days before the hearing date.
At the hearing, the Clerk of Court will listen to the evidence and determine whether the foreclosure should be allowed to proceed.
If the Clerk of Court determines foreclosure is permitted, he or she will sign the Foreclosure Order.
At this point, the foreclosure is scheduled. It must be advertised on bulletin board at the County Courthouse for at least 20 days prior to the sale. It also must be advertised in the local newspaper and has to run for at least two weeks in a row.
How is the foreclosure sale itself conducted? First, the trustee conducting the sale will read the sale notice. Bids will be made by anyone in attendance. Usually, someone from the lender attends and will buy it if no one else does.
The high bidder typically pays a deposit to secure the sale until closing. This amount is either $750 or 5% of the bid, whichever is greater. This amount will be held until the closing and applied to the sale price.
That’s not the end of the foreclosure sale, though. Interested parties may, within 10 days, increase the amount of the bid by a minimum of 5%. These increased bids are made through the Clerk of Court. Again, a deposit will be required and will be held by the Clerk of Court, who will notice any other bidders.
Finally, the Clerk of Court will collect the remaining amount of the foreclosure sale price, give a deed to the buyer, and sign a court order finalizing the release of the trustee. There will be a notice filed with the Registry of Deeds stating that the deed of trust has been foreclosed.
As you can see, the foreclosure process contains many steps and is not as simple as it sounds.
If you are facing foreclosure in North Carolina, contact Culik Law. We have negotiated with virtually every bank in the country and have helped to save numerous families from foreclosure with options like loan modifications and forbearances. We offer a no-cost case evaluation to determine whether we can help.