NORTH CAROLINA FORECLOSURE TERMS
Mortgagee—Creditor/Bank
Mortgagor –Debtor/ Homeowner
Deed – legal document used to convey legal interest in a property.
Acceleration/Due on Sale Clause- A clause that provides for the acceleration of the entire mortgage debt, typically following default or sale of the property. The Full amount becomes immediately due.
Foreclosure-Legal process initiated by the mortgagee by which mortgagor is deprived of his interest in the property, typically following default and acceleration.
 Three types
o Strict (common law)
o Judicial
o Power of Sale
Alternate Options:
o Sue on note—only if the Debtor/Mortgagor has cause to.
o Deed in lieu of foreclosure
o Bankruptcy –this stops the foreclosure process automatically upon filing.
Deed In lieu of Foreclosure-Mortgagor hands over a deed to mortgagee in satisfaction of the debt.
Pros
o Bypass equitable right of redemption.
o Avoids liability possible mortgagor’s credit and a deficiency judgment.
o Mortgagee need not initiate proceedings
Cons
o Bank must agree to these terms (within the bank’s sole discretion)
o Negative impact on Debtor/Mortgagor’s credit for same period of time as foreclosure
Tax Implications
o Deed tax: Since deed in lieu foreclosure involves the transfer of property, the borrower may need to pay a county deed tax on conveyance of property to the lender.
o The tax is calculated on the difference between the fair market value of your property and your mortgage balance plus any liens removed from the property due to the deed in lieu.
o Income tax on canceled debt: Debtor/Mortgagor may have to pay income tax to IRS for unpaid balance paid to the lender, unless certain criteria are met (see conditions for mortgage tax relief.)
Deficiency- Following a foreclosure sale the proceeds of which are not sufficient to cover debt, mortgagee sues mortgagor to recover remainder of debt.
Implications
o Separate Action by the Mortgagee and will show on credit report as a separate item
o Debtor will still be liable for this debt after foreclosure
Equitable Right of Redemption- Debtor’s right to redeem foreclosed property.
Statutory (NC) right accrues on foreclosure sale. Power of sale terminated by submitting an upset bid within (10) ten days of sale or resale is held and payment in full of the note is made or tendered.
Frequently Asked Questions
Q. Can the mortgagee purchase property at a foreclosure sale?
A. Yes, the mortgagee may and often to purchase the property at the sale.
Q. Does North Carolina recognize deed in lieu of foreclosure?
A. Yes, Bank must agree to these terms it is within the bank’s sole discretion to deny or approve such action. From experience the often choose to move forward with their statutory right of foreclosure rather than this process.
Q. Once the foreclosure process has commenced can the debtor pay off the amount in arrears in order to redeem the property?
A. No the full note must be paid according to North Carolina Law (right of redemption) in order to suspend the process.
Q. If a Debtor/Mortgagor has submitted a loan modification can the mortgagee/bank move forward with the foreclosure process?
A. Yes, the mortgagee has a statutory right to commence foreclosure proceedings upon default.
Q. How long will a foreclosure affect a debtor’s credit?
A. It remains for ten (10) years on a debtor’s credit.
Q. How long will bankruptcy remain on a debtor’s credit?
A. Ten (10) years, however more than the just the mortgage can be taken care of with a bankruptcy. You may apply for a HUD loan within one (1) year of filing and other loans within two (2) years of filing for bankruptcy.
Maxwell Law Firm represents clients in North Carolina with: bankruptcy court, filing for bankruptcy, chapter 7 bankruptcy, foreclosure defense, chapter 13 bankruptcy representation, and loan modifications. We have offices in Charlotte and Concord, North Carolina. Our two offices offer clients the convenience of meeting face-to-face with an attorney without having to travel far and take time away from their live. TELEPHONE CONSULTATIONS ARE ALSO AVAILABLE. You may schedule your appointment by calling 704-780-1100 or save 25% off the fees and schedule online.
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Maxwell Law Firm, PLLC is located in North Carolina and represents clients in the Following Regions: Mecklenburg County: Charlotte, Cornelius, Davidson, Huntersville, Matthews, and Mint Hill. | Union County: Hemby Bridge, Indian Trail, Lake Park, Marshville, Marvin, Mineral Springs, Monroe, Stallings, Unionville, Waxhaw, Weddington, Wesley Chapel, and Wingate. | Gaston County: Belmont, Bessemer City, Cherryville, Cramerton, Dallas, Gastonia, Lowell, and McAdenville. | Cabarrus County: Concord, Harrisburg, Kannapolis, and Midland. | Lincoln County: Denver, Iron Station, and Lincolnton. | Cleveland County: Archdale, Boiling Springs, Kings Mountain, Lawndale, Polkville, and Shelby. | Anson County: Ansonville, Burnsville, Mineral Springs, Polkton, and Wadesboro. | Stanly County: Albemarle and Locust. | Rowan County: China Grove, Landis, Rockwell, Salisbury 
