North Carolina Foreclosure Laws: Process, Timeline and Your Rights

North Carolina has two methods. Most deeds of trust in the state contain "power of sale" language, which allows a trustee to sell the home after a hearing before the clerk of superior court (filed as a special proceeding); the clerk must authorize the sale first. A lender can instead file a foreclosure by civil action, heard by a judge. The North Carolina Judicial Branch says that under either method, a home cannot be sold without first getting a court order permitting the sale.

For a home loan on a primary residence, the servicer must mail a pre-foreclosure notice at least 45 days before filing the notice of hearing. It must itemize the past-due amounts and other charges needed to bring the loan current, say the borrower may have options other than foreclosure, and give contact information for the servicer, HUD-approved counseling agencies and the State Home Foreclosure Prevention Project. For a power-of-sale foreclosure, a notice of hearing must then be served on the borrower and record owners at least 10 days before the hearing before the clerk (or posted on the property at least 20 days before, if personal service fails); it must describe the default, any right to pay or cure, and the right to appear and contest. After the clerk authorizes the sale, the notice of sale must be posted at the courthouse at least 20 days before the sale, mailed at least 20 days before the sale to those entitled to notice (and to tenants in residential property with fewer than 15 rental units), and published in a newspaper once a week for at least two weeks.

Minimum time frames in a power-of-sale foreclosure of a home loan: the pre-foreclosure notice must go out at least 45 days before the foreclosure is filed, and the Housing Finance Agency may extend that filing date once by up to 30 days; the notice of hearing must be served at least 10 days before the clerk's hearing; the clerk's order may be appealed within 10 days; the notice of sale must be posted and mailed at least 20 days before the sale, with the last newspaper publication no more than 10 days before the sale; and after the sale there is a 10-day upset bid period, restarted by each new upset bid, before the sale becomes final.

The power of sale ends if, before the sale (or before the upset bid period after a sale ends), the owner pays or tenders the full obligation secured by the deed of trust plus the expenses of the sale, including the trustee's compensation. Whether the borrower can instead cure the default by catching up on missed payments depends on the loan documents; the notice of hearing must state any right to pay the debt or cure the default "if such is permitted." The Judicial Branch says borrowers may be able to negotiate a loan modification or other resolution at any time until the sale is final.

After a power-of-sale foreclosure sale, anyone may file an upset bid (at least 5% higher, minimum $750) within 10 days after the report of sale or the last upset bid. If no upset bid is filed in that period, the rights of the parties to the sale become fixed. Until then, the owner can stop the sale by paying the full secured debt and the sale expenses.

Limited. A lender may not get a deficiency judgment on a seller-financed purchase-money mortgage or deed of trust whose note shows on its face that it is for the balance of the purchase price. When the lender itself buys the home at a power-of-sale foreclosure and then sues for a deficiency, the borrower may defend by showing the home was worth the amount of the debt or that the bid was substantially less than its true value. A person obligated on the debt who was not served with the notice of hearing is not liable for any deficiency.

There is no separate mediation program in the statutes reviewed, but the clerk's hearing includes a resolution step. When the borrower lives in the home as a principal residence, the clerk must ask what the lender or servicer has done to resolve the default (unless the lender files an affidavit describing those efforts), and must continue the hearing for up to 60 days if there is good cause to believe more time or measures, such as forbearance or a loan modification, are reasonably likely to resolve the delinquency without foreclosure. Separately, the State Home Foreclosure Prevention Project, run by the N.C. Housing Finance Agency, offers free housing counseling.

In residential property with fewer than 15 rental units, the notice of sale must also be mailed to each tenant (by name, or to "occupant") at least 20 days before the sale. After receiving it, a tenant may end the lease early with written notice effective 10 to 90 days after the sale date in the notice, as long as the owner has not cured the default, owing rent only through the termination date. After the sale, the buyer can get an order for possession from the clerk only after giving occupants 10 days' notice, or 30 days' notice in residential property with 15 or more rental units.

Yes. In a planned community, an assessment unpaid for 30 days or more becomes a lien when the association files a claim of lien with the clerk of superior court, after mailing the owner a statement of the amount due at least 15 days before filing. The association, through a vote of its executive board on the specific lot, may foreclose the lien like a deed of trust under power of sale if the assessment remains unpaid for 90 days or more. A lien made up only of fines (or interest and attorneys' fees tied only to fines) can be enforced only by judicial foreclosure. The lien ends unless enforcement starts within three years after the claim of lien is filed, and it ranks behind mortgages recorded before it and property taxes. Condominium associations have a similar lien under G.S. 47C-3-116.

Yes. In the residential transfers covered by the law, the owner must give the buyer the standard residential property disclosure statement required by the North Carolina Real Estate Commission and an Owners' Association and Mandatory Covenants Disclosure Statement, no later than when the buyer makes an offer. For each item the owner may disclose what they actually know or state that they make no representations. If the statements are not delivered by the time of the offer, the buyer may cancel the contract, generally within three calendar days after receiving the statement or after the contract was made (or before closing or occupancy, if sooner), and get the deposit back. Exempt transfers include foreclosure sales, court-ordered and estate transfers, transfers between co-owners or close family, and, for the property statement, a first sale of a never-occupied home or when both parties agree not to complete the statements.

Local governments collect unpaid property taxes by foreclosing the tax lien, either by a civil action or by an in rem procedure. In a civil-action tax foreclosure, the owner can redeem before the court confirms the foreclosure sale by paying at least all taxes then due to the local government, plus penalties, interest and costs (and the commissioner's fee if redeeming after the sale). Within 10 days after the sale report is filed, interested persons may file exceptions and anyone may file an increased bid. In the in rem procedure, the lien may be paid before judgment, and before the sheriff's execution sale the owner may ask the clerk to set aside the judgment because the tax was paid or the lien is invalid.

The State Home Foreclosure Prevention Project, run by the North Carolina Housing Finance Agency, provides free foreclosure-prevention counseling at any stage through HUD-approved housing counseling agencies; counselors can work with servicers and refer lower-income homeowners to free legal services. Call the Agency at 1-888-442-8188 to be connected to a counselor. The Judicial Branch also points to Legal Aid of North Carolina, 1-866-219-5262, and warns about foreclosure rescue scams.