If you own a home – you should know….
The foreclosure moratorium or mortgage moratorium protects homeowners from losing their house if you can’t pay your mortgage for any of the reasons related to the pandemic. Many folks believe that the foreclosure moratorium was set by the CDC, and even the countries leaders keep going back to the CDC (a non-elected, scientific body who is not charged with writing laws) wanting them to continie to extend the moratorium. But as the Supreme Court has ruled, the CDC has no legal authority to write mandates for other parts of government such as FHA, VA, and the banking industries.
Many of the government related programs had placed moratoriums on collections and foreclosures because of the pandemic, however it did not cover conventional loans, nor did it include items in process of foreclosure. You are still in the foreclosure process, it was just frozen. However, with the court system opening back up, the tax foreclosures have already started being processed.
When Does the Foreclosure Moratorium Expire?
Much like the eviction moratorium, the foreclosure moratorium continues to get extended. But here is the Either way, seeing July as the expiration date will keep you from being caught off guard by a foreclosure notice from your lender in case this is the final extension.
Who’s Covered Under the Foreclosure Moratorium?
The foreclosure moratorium applies to only federally backed mortgage program providers like Fannie Mae, Freddie Mac, HUD/FHA, VA and USDA. But even if you have a private loan through a local bank, you might still be covered by a foreclosure moratorium at the state or local level. But you have to be proactive on your conventional loan and call them and have the discussion.
What commonly happens when you can not pay, you become embarrassed and stop communicating with your mortgage lender. Silence leads to court action, and it costs you your sanity and your home. There is nothing more thrilling that a Sheriff Deputy showing up at your door to escort you out of the property and lock the doors.
To be covered under the foreclosure moratorium or to request or extend your forbearance period, contact your mortgage service provider. If you do not contact them – then you can be assured, that they will not be kind to you as far as that is concerned.
Look, if you losts your job because of COVID, they get it – they understand. They have the ability to help you but if you don’t make that first move – they will think your situation is perfectly fine and put you into the standard program, or worse, place you back on the rolls to pay.
What could possibly happen?
Well, during the pandemic there were some who stopped paying their mortgage entirely even though they had the means. There are a few things you should know about that.
First, your tax records will out you, and you will be due in full. What do I mean by that? If you were capable of working and paying your mortgage during that period – when the mortgage company verifies income – you are going to need to come up with the cash. Now, I may be wrong, but we are going to err on history of mortgage companies actions on this one. If you have a $1,440 a month mortgage payment – then you are going to owe $17.000+ when the moratorium is expired.
Second, if you can not pay, you might be on two tracks of trouble. The first from your mortgage company, and the county government who has been waiting for the taxes to be paid on your property. It will be a race to the courthouse as to who files the lein first. It will be a whirlwind of noise because the sherrif will show up and evict you first, then tons of filings next and then what would be left is, well, your credit.
So how can you avoid all of that? I’m glad you asked.
How Can I Stop a Foreclosure in North Carolina?
A few potential ways to stop a foreclosure include reinstating the loan, redeeming the property, or filing for bankruptcy.
If you are in a status called pre-foreclosure you have a couple of options. Get caught up, or seek out a Realtor to start the process of selling the home. The Realtor should be in contact with the mortgage company to let them know that you are hired to sell the property and give them the pertenent information they need, and get the information that they need.
What happens if I am upside down?
If you are upside down in your loan which means a couple of things:
- You paid more than the actual appraisal value or the Comparable Market value and owe more than it is worth (which is actually quite common – such as you paid $300,000 for a $225,000 appraised property, a $75K overage)
- You are making payments on a property that has devalued because of the market (2008)
- You have lost your job and find yourself unable to pay for the property now because your income went negative.
You will need to contact your mortgage lender and ask them if you can sell the property in a short sale situation. This can happen in two ways:
- Traditional Real Estate for the CMA pricing, with you coming to the table with the difference from the sale price versus the price owed. In some cases you will get an occasional offer that is higher, hoping there is no difference to make up.
- Sell it at auction, which the auction will bring in bidders who want the property, and can easily be something in which you make the most (buyer versus buyer) drives the price up, relieving pressure on you.
Reinstating the Loan
While state law doesn’t provide a statutory right to reinstate the loan before the sale, many deeds of trust, like the uniform Fannie Mae and Freddie Mac deeds of trust, give the borrower the right to complete a reinstatement. Check your loan documents to find out if you have a reinstatement period and, if so, the deadline to do so. Do not wait a week after that deadline and claim you didn’t know – you would have found out too late!
Redeeming the Property Before or After the Sale
One way to stop a foreclosure is by “redeeming” the property. To redeem, you have to pay off the full amount of the loan before the foreclosure sale. You will have a small window to do this, and with multiple hundred of thousands of dollars you may have to pay – you are unfortunately unlikely to be able to pay it off.
Some states also provide foreclosed borrowers with a redemption period after the foreclosure sale, during which they can buy back the home. North Carolina law provides an upset-bid period that initially lasts for ten days after the report of sale is filed. So, after the foreclosure sale, another buyer can come in and buy the home by making a higher bid than was bid at the sale. This kind of bid is called an “upset bid.” Once an upset bid is made, it starts a new 10-day upset-bid period. During the upset-bid period, the borrower has the right to pay the debt in full and redeem the property. (N.C. Gen. Stat. § 45-21.20, § 45-21.27).
Filing for Bankruptcy
If you’re facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy. Once you file for bankruptcy, something called an “automatic stay” goes into effect. The stay functions as an injunction, which prohibits the lender from foreclosing on your home or otherwise trying to collect its debt, at least temporarily.
If you do it after the sale, your out of luck. Bankruptcy is designed to STOP an action, not prevent an action that has already taken place.
In many cases, filing for Chapter 7 bankruptcy, also known as liquidation or forgiveness bankruptcy, can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy, also known as a restructuring bankruptcy, might be the answer. To find out about the options available to you, speak with a local bankruptcy attorney.
North Carolina Deficiency Judgment Laws
In a foreclosure, the borrower’s total mortgage debt frequently exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a “deficiency.” For example, say the total debt owed is $300,000, but the home sells for $250,000 at the foreclosure sale. The deficiency is $50,000. In some states, the lender can seek a personal judgment against the borrower to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrower.
That’s not all – if you have a HELOCK or a Home Improvement Loan, they can also sue you directly for their deficency they have because of the same interest as the Primary Mortgage holder. They are simply a second mortgage holder.
In North Carolina, a deficiency judgment isn’t allowed if the loan was a purchase money, seller financed mortgage or deed of trust. (N.C. Gen. Stat § 45-21.38).
The lender might also be barred from seeking a deficiency judgment after foreclosure if:
- the loan is nontraditional, like a loan that permits the borrower to defer payment of principal or interest and allows negative amortization of the loan balance, or is a rate spread home loan (where the annual percentage rate exceeds a certain threshold), and
- the loan secures borrower’s principal residence. (N.C. Gen. Stat. § 45-21.38A).
Where to Find Your State’s Statutes and More Foreclosure Resources
How to Find Federal Foreclosure Laws
How to Find State Foreclosure Laws
To find North Carolina’s laws, search online for “North Carolina statutes” or “North Carolina laws.” Make sure you’re reading the most recent, official laws. Usually, the URL will end in “.gov” or the statutes will be on an official state legislature webpage. That page is https://www.ncleg.gov/Search/GeneralStatutes enter Forelosure into the search bar, and it will return all of the North Carolina Laws on Foreclosures.
More Foreclosure Resources
For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Although the programs under the Making Home Affordable (MHA) initiative have expired, the MHA website still contains useful information for homeowners facing foreclosure.
Do not forget, that there are churches and other organizations that have some help that help you with mortgage relief, but you have to ask if they have it, and in some cases you may be put into a program such as Dave Ramsey’s Financial Peace University. Take the course even if you don’t want to – it will assist you in realizing what is going on.
How courts and agencies interpret and apply laws can change. And some rules can even vary within a state. These are just some of the reasons to consider consulting a lawyer if you’re facing a foreclosure. If you have questions about North Carolina’s foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.
It’s also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options. You can use the CFPB’s Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area. You can also call the Homeownership Preservation Foundation (HOPE) Hotline, which is open 24 hours a day, seven days a week, at 888-995-HOPE (4673).