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A foreclosure proceeding is the process in state court under which the mortgagor (homeowner) is deprived of his or her interest in the property, and the mortgaged property is sold in full or partial satisfaction of the debt.

In North Carolina, a foreclosure proceeding is a relatively streamlined process, and proceeds under Article 2A of Chapter 45 of the North Carolina General Statutes.  The lender instructs the “trustee” on the mortgage that there has been a default, and instructs the trustee to foreclose.  The trustee then sends you several required letters. 

The trustee then files the foreclosure action at the county courthouse.  The foreclosure action is called a “special proceeding,” and it will have a number that starts with the year, then “SP” and then the case number.  For example, a foreclosure filed in 2010 will have 10-SP-12345; and so on.

You will receive a notice of the foreclosure.  If the bank or mortgage company tells you that the house is “in foreclosure,” the information might not be accurate.  You have to receive a notice of foreclosure that is filed in the state court.   The top of the notice will look something like this:

COUNTY OF MECKLENBURG                                      BEFORE THE CLERK
FILE NO. 11-SP-12345

In the Matter of the Foreclosure of  )  
A Deed of Trust executed by John )  
Doe and Jane Doe on December 25, ) Notice of Foreclosure Hearing
2010, in the original amount of )  
$100,000, and recorded in Deed Book )  
Xxxxx at Page xxx. )  

Following that heading will be a notice as to the date and time and location of the foreclosure hearing.  If you live in Mecklenburg County, the foreclosure hearing will take place on the third floor of the county courthouse. 

What happens at the hearing?  The foreclosure hearing is held by the Clerk of Court (or an Assistant Clerk of Court).  At the foreclosure hearing, the Clerk considers the evidence of the parties, and may consider affidavits and certified copies of documents.  To move forward toward a sale, the Clerk must find the existence of the following four elements:

(i)         Valid debt of which the party seeking to foreclose is the holder;
(ii)        Default
(iii)       Right to foreclose under the deed of trust and
(iv)       That the debtor received notice of the hearing.

If there is a defense that does not fall within one of these four categories, then to stop the foreclosure, the debtor would have to file a lawsuit in Superior Court and obtain a temporary restraining order from a judge.  An example would be where the debtor was not in default, because he had paid the debt but the mortgage company had put the payment in the wrong account.

In addition, under section 25-21.16C of the General Statutes, the Clerk may continue the foreclosure hearing for up to 60 days if the Clerk finds that additional time or additional measures have a reasonable likelihood of resolving the delinquency without foreclosure.    For example, if the debtor/homeowner shows that she has applied for a mortgage modification, then she would qualify for the 60 day continuance.  Therefore, if there is a foreclosure hearing, and you want to try to save the house through a mortgage modification you should attend the foreclosure hearing in order to obtain the continuance.  Even if the mortgage company says that the hearing will be continued and you do not need to attend, you should attend.  Mortgage companies occasionally will give inaccurate information to the homeowner about hearing dates.  If you attend the hearing, then you will receive a written order of continuance from the Clerk of Court at the hearing.

If you lose the foreclosure hearing, then there is a sale of the property.  The sale date is usually at least 20 days following the hearing date.  The trustee on the deed of trust has to have a notice of the sale posted on a bulletin board at the county courthouse and also has to publish a notice of sale in a newspaper.  In Mecklenburg County, the newspaper usually is The Mecklenburg Times, a small newspaper that publishes the court calendars and also publishes foreclosure notices and other notices.

After the sale, the trustee on the deed of trust files a preliminary report with the Clerk of Court.  There follows a ten day upset bid period.  If no upset bid is filed, then at the close of the 10 day upset bid period, the trustee files the final documents, as well as the trustee’s deed to the purchaser of the house, and the homeowner is no longer the owner of the property.  A Chapter 13 Bankruptcy must be filed before the end of the 10 day upset bid period or it is too late.

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Martin Hunter
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Mindy Holt
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