North Carolina foreclosures are typically nonjudicial (out of court), although one of the required steps 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 laws yourself. (To learn general information about what foreclosure is, how it works, and what options are available to you when facing foreclosure, see What Is Foreclosure? An Introduction.)
Again, the most common type of foreclosure process in North Carolina is nonjudicial. In most states, the lender never has to go to court in a nonjudicial foreclosure. But in a North Carolina nonjudicial foreclosure, a hearing has to take place before the clerk of court. Judicial foreclosures, where the foreclosing party files a lawsuit against the borrower in court and a judge decides the matter, can also occur.
Because most foreclosures in North Carolina are nonjudicial, this article focuses on that process.
The foreclosing party must provide four types of foreclosure notices to a defaulting borrower:
Preforeclosure notice. At least 45 days prior to the filing of a notice of hearing, which officially starts the nonjudicial foreclosure, the foreclosing party must mail the borrower a notice about the amount due and 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 within 30 days the date of the notice of hearing. (N.C. Gen. Stat. § 45-21.16(c)(5a)).
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 (or 20 days if served by posting). (N.C. Gen. Stat. § 45-21.16). The clerk may continue (postpone) the proceedings for up to 60 days if the property is the borrower’s principal residence, and it's likely that the borrower and foreclosing party will be able to resolve the matter without a foreclosure. (N.C. Gen. Stat. § 45-21.16C). But if a postponement isn’t warranted and the foreclosing party took certain procedural steps, the clerk will authorize a foreclosure sale.
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).
If the mortgage or deed of trust originated before a borrower’s period of military service, North Carolina law prohibits the lender from exercising a power of sale contained in a mortgage or deed of trust while the borrower is on active duty or within 90 days thereafter. State law also prohibits the clerk of court from conducting the initial hearing before a nonjudicial foreclosure unless the foreclosing party provides an affidavit affirming that the hearing won’t happen occur while the homeowner is on active duty or within 90 days thereafter. (N.C. Gen Stat. § 45-21.12A).
A federal law—the Servicemembers Civil Relief Act—also provides protections to military service members who’re facing foreclosure.
“Reinstating” a loan is when the borrower catches up on the missed payments, plus fees and costs, in order to stop a foreclosure.
North Carolina law does not provide the borrower with the right to reinstate before the sale. But the terms of many mortgages and deeds of trust give the borrower the right to reinstate. Or the lender or servicer might allow the borrower to reinstate, even if the loan contract doesn’t contain a reinstatement provision.
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 "upset bid" period. The upset-bid period initially lasts for ten days after the report of sale is filed. (N.C. Gen. Stat. § 45-21.20). (In North Carolina, following the foreclosure sale, another buyer may buy the home by making a higher bid than was bid at the sale. This higher bid is called an "upset bid." After an upset bid is made, it starts a new 10-day upset bid period.)
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, which is 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, like after the 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:
If the foreclosed homeowner doesn’t leave after the foreclosure, the purchaser from the sale must give the former owner a notice to quit (leave) before going to court clerk to get an order for possession. (N.C. Gen. Stat. § 45-21.29).
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 lawyer. It’s also a good idea to make an appointment to speak to a HUD-approved housing counselor, especially if you want to learn about different loss mitigation (foreclosure avoidance) options.