North Carolina foreclosures are typically nonjudicial (out of court), though one of the required steps in this type of foreclosure is a hearing before a court clerk prior to the sale. If you're a struggling homeowner facing foreclosure in North Carolina, you most likely have many questions about how the foreclosure process works. For example: How much notice will you get before the foreclosure starts? Does North Carolina law permit you to reinstate the mortgage by paying the past-due amounts before the sale? Can you redeem the home after the sale? Can the foreclosing party get a deficiency judgment after a North Carolina foreclosure?
To get answers to these questions and more, read on. The summary below gives information about many of the key features of North Carolina foreclosure law along with citations to the statutes so you can read the law yourself.
Locating North Carolina’s Foreclosure Laws
The citations to North Carolina’s foreclosure statutes are:
- North Carolina General Statutes Sections 45-21.1 through 45-21.38C, and
- North Carolina General Statutes Sections 45-100 through 107.
You can find the North Carolina statutes on the North Carolina General Assembly’s website at www.ncleg.net/gascripts/statutes/statutes.asp. If you need help locating the statutes, see Finding Your State’s Foreclosure Laws.
North Carolina’s Foreclosure Laws
We’ve summarized the main parts of North Carolina’s foreclosure laws below. You can find more detailed articles on various aspects of North Carolina foreclosure law in Nolo’s North Carolina Foreclosure Law Center.
Most Prevalent Type of Foreclosure Process in North Carolina
The most prevalent type of foreclosure process in North Carolina is nonjudicial. In a nonjudicial foreclosure, the lender does not have to file a lawsuit to foreclose. In most states, the lender never has to go to court in a nonjudicial foreclosure. However, in a North Carolina nonjudicial foreclosure there must be a hearing before the clerk of court prior to the foreclosure sale.
Judicial foreclosures, where the foreclosing party files a lawsuit against the borrower in court and a judge will decide the matter, can also occur.
Because most foreclosures in North Carolina are nonjudicial, this article focuses on that process.
Notice of the Foreclosure
The foreclosing party must provide four types of foreclosure notices to a defaulting borrower:
Pre-foreclosure notice. At least 45 days prior to the foreclosure, the foreclosing party must mail the borrower a notice about resources that are available to avoid foreclosure. N.C. Gen. Stat. § 45-102.
Notice of default. The foreclosing party must mail a notice of default to the borrower 30 days prior to delivering the notice of hearing. N.C. Gen. Stat. § 45-21.16.
Notice of hearing. To officially start the foreclosure, the foreclosing party files a notice of hearing with the court clerk. The foreclosing party must serve a notice of hearing to the borrower at least ten days before the hearing takes place. N.C. Gen. Stat. § 45-21.16.
The clerk may continue (postpone) the proceedings for up to 60 days if it is likely that the borrower and foreclosing party will be able resolve the matter without a foreclosure. N.C. Gen. Stat. § 45-21.16C.
Notice of sale. At least 20 days before the sale, the foreclosing party must mail a notice of sale to the borrower and post the notice in a public place. It must also publish the notice in a newspaper for two weeks before the sale. N.C. Gen. Stat. § 45-21.17.
Special Foreclosure Protections in North Carolina
North Carolina law prohibits a nonjudicial foreclosure during (or within 90 days after) a borrower’s period of military service if the borrower took out the mortgage or deed of trust before going on active duty. N.C. Gen Stat. § 45-21.12A. (There is also a federal law, the Servicemembers Civil Relief Act, which provides protections to military service members who are facing foreclosure.)
Reinstating the Mortgage Before the Foreclosure Sale in North Carolina
“Reinstating” is when the borrower catches up on the defaulted mortgage's missed payments (plus fees and costs) in order to stop a foreclosure. (Learn more about reinstatement to avoid foreclosure.)
North Carolina law does not provide the borrower with the right to reinstate before the sale. However, the terms of your mortgage or deed of trust may give you the right to reinstate or your lender or servicer might agree to let you reinstate, even if there is no such provision in your contract.
Right of Redemption After Foreclosure in North Carolina
In some states, you can redeem (repurchase) your home within a certain period of time after the foreclosure.
In North Carolina, the borrower can redeem the home during the 10-day "upset bid" period after the foreclosure sale. N.C. Gen. Stat. § 45-21.20. (To learn more about the upset bid period and get details on redemption after a foreclosure in North Carolina, see Nolo’s article If I lose my home to foreclosure in North Carolina, can I get it back?)
North Carolina’s Anti-Deficiency Laws
When the total mortgage debt exceeds the foreclosure sale price, the difference is called a “deficiency.” Some states allow the lender to seek a personal judgment (called a “deficiency judgment”) against the borrower for this amount, while other states prohibit deficiency judgments with what are called anti-deficiency laws.
In North Carolina, the foreclosing party can get a deficiency judgment after a nonjudicial foreclosure, except in certain instances. For example, the lender cannot seek a deficiency judgment after a nonjudicial foreclosure of a purchase money (seller financed) mortgage or deed of trust. N.C. Gen. Stat § 45-21.38. The foreclosing party may also be barred from seeking a deficiency judgment in certain cases when the mortgage or deed of trust is:
- nontraditional (for example, Pick-a-Payment or Option ARM loans) or is a rate spread home loan (where the annual percentage rate exceeds a certain threshold), and
- secures the borrower’s principal residence. N.C. Gen. Stat. § 45-21.38A. (To get details about the deficiency law in North Carolina, see North Carolina Laws on Post-Foreclosure Deficiency.)
Notice to Leave After the Foreclosure Sale
If the foreclosed homeowner doesn’t leave after the foreclosure, the new owner must give the former owner a 10-day notice to quit (leave) before going to court to get an order for possession. N.C. Gen. Stat. § 45-21.29.