22 Aug North Carolina Legislative Update
The North Carolina legislature recently enacted legislation to make technical corrections to its general statutes and session laws. This memorandum will address the changes effective August 11, 2014; a subsequent memorandum will address January 1, 2015 changes.
NORTH CAROLINA HOUSE BILL 1133
In addition to the activities prohibited under other provisions of North Carolina law, it is unlawful for any person in the course of any residential mortgage loan transaction who is acting as a mortgage servicer to fail to mail, at least 45 days before foreclosure is initiated, a notice addressed to the borrower at the borrower’s last known address with the following information:
- An itemization of all past due amounts causing the loan to be in default;
- An itemization of any other charges that must be paid in order to bring the loan current;
- A statement that the borrower may have options available other than foreclosure and that the borrower may discuss the options with the mortgage lender, the mortgage servicer, or a counselor approved by the U.S. Department of Housing and Urban Development (HUD);
- The address, telephone number, and other contact information for the mortgage lender, the mortgage servicer, or the agent for either of them who is authorized to attempt to work with the borrower to avoid foreclosure;
- The name, address, telephone number, and other contact information for one or more HUD-approved counseling agencies operating to assist borrowers in North Carolina to avoid foreclosure; and
- The address, telephone number, and other contact information for the State Home Foreclosure Prevention Project of the Housing Finance Agency (formerly the consumer complaint section of the Office of the Commissioner of Banks).
Definition of Home Loan
As it pertains to the laws on contract rates on home loans secured by first mortgages or first deeds of trust, the term “home loan” is defined as a loan, other than an open-end credit plan, where the principal amount is less than three hundred thousand dollars ($300,000) secured by a first mortgage or first deed of trust on real estate upon which there is located or there is to be located one or more single-family dwellings or dwelling units or secured by an equivalent first security interest in a manufactured home.
With regard to any improvements to real property for which the costs of the undertaking are thirty thousand dollars ($ 30,000) or more, either at the time that the original building permit is issued or, in cases in which no building permit is required, at the time the contract for the improvements is entered into with the owner, the owner must designate a lien agent no later than the time the owner first contracts with any person to improve the real property. Provided, however, that the owner is not required to designate a lien agent for improvements to an existing single-family residential dwelling unit that is occupied by the owner as a residence, or for the addition of an accessory building or accessory structure as defined in the North Carolina Uniform Residential Building Code, the use of which is incidental to that residence. The owner must deliver written notice of designation to its designated lien agent by any method authorized by law and must include in its notice the street address, tax map lot and block number, reference to recorded instrument, or any other description that reasonably identifies the real property for the improvements to which the lien agent has been designated, and the owner’s contact information. Designation of a lien agent pursuant to this section does not make the lien agent an agent of the owner for purposes of receiving a Claim of Lien on Real Property, a Notice of Claim of Lien upon Funds, a Notice of Subcontract, or for any purpose other than the receipt of notices to the lien agent as required by law.
The form of the notice must be legible and must include certain information unless designated as “if available.”
The service of the Notice to Lien Agent does not satisfy the service or filing requirements applicable to a Notice of Subcontract, a Notice of Claim of Lien upon Funds, or a Claim of Lien on Real Property. A Notice to Lien Agent must not be combined with or make reference to a Notice of Subcontract or Notice of Claim of Lien Upon Funds.
Settlement Agent Duties
The settlement agent must not disburse any of the closing funds prior to verification that the closing funds used to fund disbursement are deposited in the settlement agent’s trust or escrow account in one or more forms prescribed by North Carolina law. A settlement agent may disburse funds from the settlement agent’s trust or escrow account (to either the applicable Register of Deeds or directly to a private company authorized to electronically record documents with the Office of the Register of Deeds) as necessary to record any deeds, deeds of trust, and any other documents required to be filed in connection with the closing, including excise tax (revenue stamps) and recording fees, but the settlement agent may not disburse any other funds from its trust or escrow account until the deeds, deeds of trust, and other required loan documents have been recorded in the Office of the Register of Deeds.
A registered loan originator may also apply for licensure as a transitional mortgage loan originator.