North Carolina General Statutes 45-21.38A. Deficiency judgments abolished where mortgage secured by primary residence
(a) As used in this section, the term “nontraditional mortgage loan” means a loan in which all of the following apply:
(1) The borrower is a natural person.
Terms Used In North Carolina General Statutes 45-21.38A
- Amortization: Paying off a loan by regular installments.
- Common law: The legal system that originated in England and is now in use in the United States. It is based on judicial decisions rather than legislative action.
- Deed: The legal instrument used to transfer title in real property from one person to another.
- following: when used by way of reference to any section of a statute, shall be construed to mean the section next preceding or next following that in which such reference is made; unless when some other section is expressly designated in such reference. See North Carolina General Statutes 12-3
- Foreclosure: A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default. Source: OCC
- Lien: A claim against real or personal property in satisfaction of a debt.
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Mortgage loan: A loan made by a lender to a borrower for the financing of real property. Source: OCC
- Mortgagee: The person to whom property is mortgaged and who has loaned the money.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- property: shall include all property, both real and personal. See North Carolina General Statutes 12-3
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories, so called; and the words "United States" shall be construed to include the said district and territories and all dependencies. See North Carolina General Statutes 12-3
- Trustee: A person or institution holding and administering property in trust.
(2) The debt is incurred by the borrower primarily for personal, family, or household purposes.
(3) The principal amount of the loan does not exceed the conforming loan size for a single family dwelling as established from time to time by Fannie Mae.
(4) The loan is secured by: (i) a security interest in a manufactured home, as defined in N.C. Gen. Stat. § 143-145, in the State that is or will be occupied by the borrower as the borrower’s principal dwelling; (ii) a mortgage or deed of trust on real property in the State upon which there is located an existing structure designed principally for occupancy of from one to four families that is or will be occupied by the borrower as the borrower’s principal dwelling; or (iii) a mortgage or deed of trust on real property in the State upon which there is to be constructed using the loan proceeds a structure or structures designed principally for occupancy of from one to four families that, when completed, will be occupied by the borrower as the borrower’s principal dwelling.
(5) The terms of the loan: (i) permit the borrower as a matter of right to defer payment of principal or interest; and (ii) allow or provide for the negative amortization of the loan balance.
(b) Except as provided in subdivision (6) of subsection (c) of this section, this section applies only to the following loans:
(1) A loan originated on or after January 1, 2005, that was at the time the loan was originated a rate spread home loan as defined in N.C. Gen. Stat. § 24-1.1F.
(2) A loan secured by the borrower’s principal dwelling, which loan was modified after January 1, 2005, and became at the time of such modification and as a consequence of such modification a rate spread home loan.
(3) A loan that was a nontraditional mortgage loan at the time the loan was originated.
(4) A loan secured by the borrower’s principal dwelling, which loan was modified and became at the time of such modification and as a consequence of such modification a nontraditional mortgage loan.
(c) This section does not apply to any of the following:
(1) A home equity line of credit as defined in N.C. Gen. Stat. § 45-81(a).
(2) A construction loan as defined in N.C. Gen. Stat. § 24-10(c).
(3) A reverse mortgage as defined in N.C. Gen. Stat. § 53-257 that complies with the provisions of Article 21 of Chapter 53 of the N.C. Gen. Stat..
(4) A bridge loan with a term of 12 months or less, such as a loan to purchase a new dwelling where the borrower plans to sell his or her current dwelling within 12 months.
(5) A loan made by a natural person who makes no more than one loan in a 12-month period and is not in the business of lending.
(6) A loan secured by a subordinate lien on the borrower’s principal dwelling, unless the loan was made contemporaneously with a rate spread home loan or a nontraditional mortgage loan that is subject to the provisions of this section.
(d) In addition to any statutory or common law prohibition against deficiency judgments, the following shall apply to the foreclosure of mortgages and deeds of trust that secure loans subject to this section:
(1) For mortgages and deeds of trust recorded before January 1, 2010, the holder of the obligation secured by the foreclosed mortgage or deed of trust shall not be entitled to any deficiency judgment against the borrower for any balance owing on such obligation if: (i) the real property encumbered by the lien of the mortgage or deed of trust being foreclosed was sold by a mortgagee or trustee under a power of sale contained in the mortgage or deed of trust; and (ii) the real property sold was, at the time the foreclosure proceeding was commenced, occupied by the borrower as the borrower’s principal dwelling.
(2) For mortgages and deeds of trust recorded on or after January 1, 2010, the holder of the obligation secured by the foreclosed mortgage or deed of trust shall not be entitled to any deficiency judgment against the borrower for any balance owing on such obligation if: (i) the real property encumbered by the lien of the mortgage or deed of trust being foreclosed was sold as a consequence of a judicial proceeding or by a mortgagee or trustee under a power of sale contained in the mortgage or deed of trust; and (ii) the real property sold was, at the time the judicial or foreclosure proceeding was commenced, occupied by the borrower as the borrower’s principal dwelling.
(e) The court may, in its discretion, award to the borrower the reasonable attorneys’ fees actually incurred by the borrower in the defense of an action for deficiency if: (i) the borrower prevails in an action brought by the holder of the obligation secured by the foreclosed mortgage or deed of trust to recover a deficiency judgment following the foreclosure of a loan to which this section applies; and (ii) the court rules that the holder of the obligation secured by the foreclosed mortgage or deed of trust is not entitled to a deficiency judgment under the provisions of this section. The amount of attorneys’ fees to be awarded shall be determined without regard to the provisions of the loan documents, the provisions of N.C. Gen. Stat. § 6-21.2, or any statutory presumption as to the amount of such attorneys’ fees. (2009-441, s. 1.)