Foreclosures are not as common as they used to be as recently as 2009. They do still occur, however, and when they are required in North Carolina there can be state and federal laws that essentially compete to determine how the process will be handled.
To be sure that all legal obligations are met it is best to work with an attorney who is fully versed in the applicable laws, regardless of whether the property involved is commercial or residential.
In previous posts we have talked about how foreclosures can be dealt with through judicial and nonjudicial processes. The latter is the one that is most common under state law because it is possible to avoid taking the matter to the courts. That can wind up saving time and money, assuming loan terms make it feasible.
There are at least two federal laws that can influence what happens during foreclosure proceedings. The first is bankruptcy law. If a mortgagor in financial trouble files for bankruptcy protection any foreclosure proceeding is put on hold.
It may be possible to have the stay lifted under some circumstances, but it depends on whether there is any equity in the property. The court could modify or end a stay if the mortgage holder’s interest in the property is threatened, or if there is no equity — making the property unnecessary to an effective bankruptcy reorganization plan.
If the filing is for Chapter 7 liquidation, the mortgage holder may be able to foreclose if there is no equity in the property. If there is equity, the court could handle sale of the property.
The other federal law that might come into play is the Soldiers and Sailors Relief Act of 1940. This measure protects active duty service men and women from losing mortgaged homes. The protection extends to loans that were issued before the start of a person’s active service.
The law also requires that the service person with a mortgage be present or represented at a foreclosure hearing. That means that a nonjudicial or power of sale foreclosure isn’t possible. If it can be determined that service to the country has hindered the mortgagor’s ability to pay, foreclosure can be stayed for as long as that service continues.
Clearly, it’s important to know what laws may be in play before attempting a foreclosure.
Source: FindLaw, “Federal Laws Affecting Foreclosure,” accessed Sept. 21, 2015