For North Carolina Foreclosures, New Law Requires Notice of Notice

North Carolina governor Mike Easley has signed into law legislation that his office has touted to consumers as reducing “home foreclosure filings due to the sub-prime mortgage crisis during the next two years.” His office estimated Wednesday that the three bills signed into law would keep 25,000 foreclosures from taking place. House Bill 2623 establishes and allocates funds to the North Carolina Foreclosure Prevention Project, and requires that notice be sent to homeowners and the Commissioner of Banks at least 45 days before a foreclosure is filed; sort of a “notice of notice of default requirement,” as it was explained to us by industry experts in the area. Attorneys in the area told HW that the requirement wouldn’t likely change timelines in the area, but would add another step to the default process in the state. The law also gives the Bank Commissioner authority to extend any foreclosure filing notice period by 30 days, while the state works with a homeowner and mortgage holder to come to agreement on a loan interest rate and payments. “This program is the first of its kind in the nation that makes sure homeowners and lenders avoid foreclosures, where everyone ends up a loser,” Easley said. He was overstating his case somewhat, as other states (most notably, California) have enacted notice requirements similar to those signed into law in North Carolina. He also said the program’s goal under the law was to “bring borrowers and lenders together so that the family gets to keep their home and the bank does not lose money on the loan.” Which is also sort of nonsensical statement, too; we think that Easley meant the bank doesn’t lose as much on the loan whenever a modification is made, not that a loss is avoided altogether. “When banks are forced to foreclose, they end up losing about 40 percent on the loan,” Easley said. “By keeping people in their homes and getting banks to agree on rates, everyone comes out a winner.” Perhaps every bit as important as the new 45 day pre-notice requirement is a provision in House Bill 2188 — also signed into law by Easley on Wednesday — that eliminates yield spread premiums on subprime mortgages. The law becomes effective Oct. 1, and while there isn’t much in the way of subprime lending taking place now, the law is the first major legislation signed into law that eliminates YSPs in some form or fashion. A third bill, House Bill 2463, requires individuals and companies “serving loans” in North Carolina to register and report to the state’s banking commissioner. We believe the governor’s office meant “servicing loans,” but were unable to get clarification prior to publication of this story.