Homeowners in North Carolina that want to stop foreclosure on their home should consider the following information and alternatives to foreclosure with their lawyer, their lender, and a HUD counselor. The state of North Carolina uses both deed of trust agreements and mortgages to secure property liens in the state, and North Carolina foreclosure law permits both judicial and non-judicial foreclosure to occur. In most cases, lenders will include power of sale provisions in any home loan agreement, which will allow them to pursue non-judicial foreclosure, or power of sale foreclosure, in as little as sixty days, with the ability to also obtain deficiency liens. Homeowners should be aware of these facts, as well as the alternatives to foreclosure as soon as they realize they may soon face default on their deed of trust or mortgage obligations.
Lender Provided Options to Prevent Foreclosure
A homeowner should first consult with their lender about applicable options that may be offered to stop a mortgage or deed of trust from going into default. Lenders stand to benefit more from a homeowner paying out the life of the loan over time, than to have to resort to foreclosure proceedings. For this reason, many lenders, through their loss mitigation departments, offer homeowners the following options:
- Forbearance periods, which allow a homeowner to miss or make partial payments on a given home loan for a pre-determined period with the unpaid amounts being built back into the life of the outstanding loan balance
- Loan modification, which allows a homeowner to adjust one or more terms of their existing home loan agreement in order to make current monthly payments more manageable
- Loan refinancing, which takes a homeowner out an existing home loan and places them into a new mortgage or deed of trust agreement with more favorable terms
Federal Foreclosure Prevention Assistance Programs
To combat widespread default and foreclosure across the nation, the federal government provides a number of resources to struggling homeowners, which may provide alternatives to foreclosure. For starters, every state, including North Carolina, has local branches of the U.S. Department of Housing and Urban Development, which staff counselors available to struggling homeowners. These counselors can be a consummate source of information on foreclosure laws applicable to a homeowner, and can help homeowners determine their eligibility under existing federal programs, including:
- The HOPE for Homeowners Act of 2008: This act promotes lender incentives to provide struggling homeowners with loan modifications that change high interest, variable rate mortgages and home loans into more stable fixed rates
- The Homeowner Affordability and Stability Plan, which provides incentives to lenders who offer homeowners struggling under high, variable interest mortgages the ability to refinance under a long-term, fixed rate mortgage backed by the FHA
- The Mortgage Forgiveness and Debt Relief Act, which provides tax relief for homeowners discharging mortgage debts forgiven by their lender, which would have previously been considered taxable income under IRS statutes
Home Sale Options to Prevent Foreclosure
Other alternatives to foreclosure include a homeowner selling their home. If the value of the home and amount of equity build up is sufficient, a homeowner can sell their home and pay off all outstanding debt obligations. However, in the common event that a home’s sale price would not be sufficient to cover all outstanding home loan obligations, lenders may offer the following options:
- Deed in lieu of foreclosure, which allows a homeowner to turn over the deed or title of their home to a lender, in exchange for their lender agreeing to forgive all outstanding mortgage and deed of trust debts. This will also prevent deficiency liens that may occur, if a foreclosure is pursued
- Short sale, which will allow a homeowner to sell their home for a pre-determined price approved by their lender, which is less than the total amount of the debt obligations owed. In turn, the lender will accept the proceeds from the sale and forgive any amount of debt left over following the transactions. This method will also prevent deficiency liens
Bankruptcy as an Alternative to Foreclosure
Another option for homeowners to prevent foreclosure would be the automatic stay protections under bankruptcy laws, which mandate that all creditor collection attempts on a given debtor cease once a debtor has filed for bankruptcy. These provisions and protections, however, are only temporary and provide only a brief respite in foreclosure actions by lenders. However, going through with the bankruptcy process may offer homeowners the following benefits:
- Chapter 13, which involves reorganization of debts, will allow a homeowner to consolidate all their existing debts into one manageable monthly payment, supervised by a court-appointed bankruptcy trustee. The process may afford a homeowner to reduce their total amount of debt, while being able to retain their home, as long as they meet the conditions set forth by the trustee
- Chapter 7, which involves liquidation of assets and discharge of debts, which would include a home and mortgage loan attached to that property. Additionally, certain homestead exemptions may allow a homeowner to retain their residence, as well.
Getting Legal Help with Stopping a Foreclosure in North Carolina
Having an attorney is an integral element of any successful foreclosure prevention action. An attorney can advise homeowners on all potential options to prevent or stall foreclosure, while also representing their interests in these and other actions.
