A foreclosure is a process used by a lender to retrieve some of the money they lost from someone who has defaulted on their loan. The foreclosure process will vary from state to state, so we are going to look at the process in North Carolina.
As soon as you fall behind on your mortgage payments, you are considered to be in Pre-foreclosure. This means you have defaulted on the loan, but the foreclosure process has not yet began. In this stage, you may be charged some fees, and in most situations you will receive a Breach Letter, which is a Pre-foreclosure notice. The breach letters job is to inform you that the loan is in default and provide an opportunity for you to avoid foreclosure.
In North Carolina, a Lender can choose to do a Judicial foreclosure process or a Nonjudicial. If they choose the judicial route, they will ask a court for an order allowing the sale. You will be able to defend yourself with a written response, and if you don’t give a written response, you will automatically loose and the lender will be able to sell your home at auction. In most situations however, this is not the case.
Most of the time, lenders will opt for a nonjudicial foreclosure process because it is quicker and less expensive for them. In this process, the lender must give preforclosure notices to the borrower at least 45 days before the notice of hearing. These notices will include information such as the amount that is past due along with other charges, contact information for a lender or agent who is to help the borrower avoid foreclosure, and contact information for a HUD-approved housing counseling agency.
The foreclosure process is officially started when the lender files a Notice of Hearing with the clerk of court. This notice must be given to the borrower, and it’s usually given to them by certified mail. It must be given to the borrower no less than 10 days before the court hearing if it is given to the borrower personally, or 20 days before the hearing if it is posted on the property.
At the hearing, the clerk is able to postpone the hearing for up to 60 days if the house is the borrowers primary residence, or if there is reason to believe that it will give the borrower enough time to correct the debt and pull themselves out of the foreclosure.
Assuming the lender won and the clerk has authorized a foreclosure sale, the next step is for the lender to send a Notice of Sale to the borrower and post it in a public space within 20 days for the sale.
(Here is where you can look at our local foreclosures by the way, if you are interested in buying any: https://www.catawbacountync.gov/county-services/clerk-of-court/)
At the sale, there is what’s known as an Upset Bid Period. This is how they try to keep it fair to all potential buyers (and of course make the most money from the sale). When there is a bid, there are 10 days for any other buyer to make a higher bid, and once someone does make that higher bid, the 10 day period restarts until there are 10 consecutive days that pass where the bid is not upset. This is why a lot of foreclosure sales aren’t the “steals” that most people think they are, but hey it’s still worth a shot right? Foreclosure sales do often lead to properties being sold under market value. Whenever you submit a bid, you will need to provide a deposit. The deposit in Catawba County is usually $750 for properties under $15,000, and 5% for properties that are over $15,000.
If you are in the foreclosure process, there are ways to stop it as well. Sometimes you can reinstate the loan, you can redeem the property before or after the sale (well, in the upset-bid period at least), and there are types of bankruptcy that can delay or stop the foreclosure altogether.
For more information about foreclosure law in North Carolina, click here.