Foreclosure is an intimidating process and can be very stressful as you begin looking at the long term impacts of this legal process. Fear not though: there are an incredible amount of options at your disposal to get out the other end alive and well.
For this post, we simply want to breakdown how the North Carolina foreclosure process works and assign an approximate timeline to each phase.
What is Foreclosure?
When a home owner defaults on a loan (meaning that they are delinquent on a series of payments) or there is a another breach of the loan contract (like failing to pay taxes, failing to abide by clauses in the contract, etc) a mortgage lender will follow a specific legal process, called “Foreclosure” in which they forcefully attempt to recover the balance of home loan.
How Does It Work In North Carolina?
North Carolina is a Non-Judicial Foreclosure State, which just means that a bank doesn’t need to involve the court if it specifies such in its legal agreement with you. This is also referred to as a “Power of Sale”.
Most foreclosures in North Carolina are non-judicial but you’ll want to take a quick review of your loan documents and look for the power of sale provision as this will have an impact on the process and timeline.
However, if your bank has not included a Power of Sale provision, then the process will be done as a Judicial Foreclosure and completed entirely through the state’s court system. A Non-Judicial Foreclosure process can happen much quicker than other states, depending on the back log and the bank’s desire to take back the home.
It takes approximately 60-90 days to complete an uncontested non-judicial foreclosure, but can happen in as short as 50 days, depending on the specific circumstances.
The Pre-Foreclosure Process
Let’s start from the beginning – 6 months prior to Foreclosure. You miss your first mortgage payment. Most mortgages have a 15 day “grace period” for your mortgage payment before the bank assesses a late fee; it’s nothing super serious, but it’ll cost you a late fee.
After 30 days of non-payment, lenders have the ability to report this to credit agencies which will begin the degradation of your credit.
Your loan servicer is required to try and make live contact with you
Your lender is required to assign a employee to your case to respond to your inquiries, attempt to find a resolution, and provide required periodic notices.
Even if you cannot cure the delinquency, it’s always best to communicate with your lender about your situation. At that time that you can discuss loss mitigation and work out some form of a forbearance agreement, loan modification, or other solution to avoid any further escalation. We’ll discuss these types of agreement later on.
It’s important to understand that banks really don’t want to foreclose – it’s expensive and time consuming. So if you do not feel like your first conversations with the bank went as well as they could have, try again and come back with the confidence that it’s truly in their best interest to work with you through this time.
121 Days Past Due
After 120 days of delinquency, the lender has the ability to send a Notice of Default (12 C.F.R. § 1024.41), which means that they now have 30 days to filing a notice of hearing and begin foreclosure with the county clerk.
After this, the Foreclosure process starts, which begins by the lender filing a notice of hearing with the county clerk. This 120 day period is to give you time to come up with a solution on your own or with the bank.
Remember that this is an expensive and time consuming process for the lender, so they would much rather that you come to a resolution instead of proceeding with foreclosure.
Notice of Default (NOD)
Once you receive an NOD, it is confirmed that your lender is proceeding with foreclosure because they then have 30 days to attend the notice of hearing.
The Foreclosure Process
After a Notice is Default (NOD) is given, the foreclosure process can begin. Because North Carolina is a non-judicial foreclosure state, the foreclosure process will include two parts: a pre-sale hearing and the sale of the house.
A lender can complete the foreclosure in as little as 50 days from the pre-sale hearing, although the foreclosure process is typically 60-90 days on average but just depends on the speed of the bank.
Notice of Hearing
The foreclosure officially starts when the Notice of Hearing is filed with the county clerk. This notice must be served to you either 10 or 20 days before the hearing (10 days if served in person and 20 days if posted on the property).
The clerk may postpone the date of the hearing if (1) the residence is your primary residence and (2) the clerk believes that you have interest and the ability to resolve the delinquency.
Notice of Sale
20 days prior to the sale of the house, there must be a notice of sale will be posted. This will need to be posted before the hearing. Though the hearing can occur before the 20 day mark occurs, the notice must be posted before the hearing.
This notice is mailed to all parties and must also be published in the newspaper or website once/week for two weeks.
The foreclosure process begins with the Pre-Sale Hearing, which happens after a NOD and the Notice of Sale. The lender is required to give notice of the pre-sale hearing (usually mailed) to all interested parties no less than 10 days prior to the date of the pre-sale hearing.
At the pre-sale hearing the clerk of the court is simply confirming the fact and ensuring due process has been followed:
- Has the loan been defaulted on?
- Is the debt provable and valid?
- Does the lender and mortgage documents authorize foreclosure by power of sale?
- Have all the necessary notices been given to borrower and the general public for the notice of sale?
The timing for this pre-sale hearing is anywhere from 10-30 days from notice of pre-sale hearing, all depending on how backed up the courthouse is. At the hearing, the clerk will authorize a foreclosure sale.
Sale of the Property
Following the pre-sale hearing and the notice of sale, the trustee assigned to the foreclosure conducts a sale of your property. Most often this simply happens at the courthouse steps. Thereafter, there there is a 10 day period in which an “Upset Bid” can be made which must be a minimum of 5% higher offer than the current winning bid and a notice of the upset bid is then filed.
There are no limit to the amount fo upset bids that can occur so this can elongate the process. If 10 days passes without an upset bid at any point, the sale becomes final.
In total, the non-judicial foreclosure can take as little as 40 days to be sold and 50 days to be finalized. If the court is backed up or there are any upset bids, then the process is elongated. In reality, then average foreclosure process usually takes about 60-90 days.
One important note here is that most deeds of trust (think Fannie Mae and Freddie Mac) give the borrower the right to cure the default and reinstate the loan up to 5 days prior to the foreclosure.
There is no statutory right to do this in North Carolina, but in most deeds of trusts, it is provided as a right.
Pay attention to this. You have a legal right to pay off the total debt and reclaim the property, EVEN during the 10 day upset bid period. All the way until a sale becomes final, you have the ability to reclaim the property and get out of foreclosure.
How can I stop foreclosure?
First, take a deep breath. Hope is not lost and you have a number of tools and protections at your disposal to make it out the other end in one piece. Now that you’ve educated yourself on the process, the next step is to take action. If your lender is unwilling to work with you, there is still hope to save your credit rating, avoid bankruptcy, save you money, and get you out of your situation without any more stress.
If you are interested in selling the property, please reach out and we can listen to your situation so we can figure if a cash offer for your home is the best option for you.
If you just have a question or would like to get a cash offer on your house or have questions, call our office and we’ll steer you in the right direction (919) 926-1791. As with everything else we do at Green Street, if we don’t believe we are the right fit, we’ll be able to recommend you to someone that will help you meet your goals.