The 2007 Session of the North Carolina General Assembly enacted legislation which substantially amends several sections of the North Carolina General Statutes pertaining to foreclosure actions. All of these legislative changes became effective April 1, 2008. Two of the most notable changes are the following.

1. NCGS § 45-88 is an entirely new statute and affects loan servicing and recordkeeping. Section 45-88 requires lenders to respond to written requests or disputes from the debtor throughout the course of the loan, and to keep a record of all inquiries and responses.

2. NCGS § 45-86 regulates the timeline and notice requirements for assessment of fees on home loans and adds a 1-day posting requirement from the day the payment is received on a home loan.
These new provisions are summarized in more details below.

NCGS § 45-88: Mortgage Debt Collection And Servicing

Home Loans. Section 45-88 applies exclusively to “Home Loans,” defined as loans secured by real property located in North Carolina used, or intended to be used, by an individual borrower(s) as a dwelling. Loans are considered “Home Loans” even if the proceeds are not used to purchase the property and used for personal, family, or business purposes.

Compliance with Written Requests and Maintaining Records. The lender or servicer must make reasonable attempts to comply with a borrower’s written request for information about the home loan account and respond to any dispute initiated by the borrower. The lender or servicer shall maintain written or electronic records of each written request until such time as the loan is paid in full, satisfied or sold.

Lender’s Response to Borrower’s Requests. The holder or servicer is required to respond to a written request for information within 10 business days of receipt of the request and shall include the following (if requested):

1. whether the account is current or an explanation of the default and date of default;

2. the current balance on the loan;

3. the identity, address or other relevant information about the current holder; and

4. the telephone number and mailing address of the representative of the servicer or holder who has authority to answer questions or resolve disputes.

Accounting and Documentation. The holder or servicer shall provide the following information and or documents within 25 business days of receipt of written request from the borrower that includes or enables the servicer to identify the account and includes a statement that the account is or may be in error or otherwise provides sufficient detail to the servicer regarding information sought by the borrower:

1. a copy of the original note or an affidavit of lost note;

2. a statement that identifies all fees and charges assessed and provides a full payment history identifying in a clear manner all debits, credits and payments;

3. the period of account history shall cover a minimum of 2 years prior to the date of receipt of the request, unless servicer has not serviced the loan for 2 years, then only dating back to when loan was obtained. If lender claims that any delinquent or outstanding sums are owed on the ‘Home Loan” prior to the 2 year period, the account history must date back to the month that the outstanding sums are owed. The borrower is entitled to 1 free statement every 6 months. The lender can charge up to $50 for additional statements requested within 6 months.

Errors and Correction. The lender or servicer must promptly correct errors relating to the allocation of payments, statement of account, or payoff balance identified in any notice provided by the borrower or discovered through due diligence.

Borrower’s Remedies. Remedies of the borrower for failure of the holder or servicer to provide information:

1. A borrower who is injured may bring an action for recovery of actual damages, including reasonable attorney’s fees. The borrower is required to give the holder notice of any claimed dispute or errors 30 days prior to instituting civil action.

2. A holder or servicer is not in violation if the error was not intentional or the result of bad faith or if the error is corrected within 30 days of receipt of the notice of error.

NCGS § 45-86: Assessment Of Fees, Processing Payments

Notification of Assessment of Fees. This statute requires prompt notification for any fee assessment. Whether the borrower is in default, in bankruptcy or has been in bankruptcy, any fees incurred by a servicer or holder must be assessed within 45 days within the date incurred and must be explained clearly in a statement mailed to borrower at least 30 days after assessing the fee unless such action would be in violation of the provisions of the bankruptcy code.

Crediting Payments. All amounts received at the place where the borrower has been instructed to make payments shall be accepted and credited within one business day. If payment is not credited, notice must be given to the borrower within 10 business days why the payment is not accepted. Failure to comply with these provisions results in waiver of right to collect these fees.

Escrow Accounts. Escrow accounts are to be held for borrower’s insurance, taxes and other charges. The holder or servicer shall make all payments from the escrow account to ensure no late penalties are assessed unless the holder has a reasonable basis to believe the escrow funds will not be recovered or if the loan is more than 90 days in default.

If you have questions or need assistance with respect to the NC mortgage law, please contact David M. Warren at 919.783.1112 or dwarren@poynerspruill.com.