Reverse Mortgages and the Foreclosure Process in North Carolina
Reverse mortgages have grown in popularity in recent years and some retirees are using them as part of a retirement plan. This post explains some of the unique issues that arise when lenders try to proceed with a reverse mortgage foreclosure in North Carolina.
The Difference Between a Reverse Mortgage Foreclosure and a Traditional Mortgage ForeclosureIn a traditional residential foreclosure, the lender typically proceeds based upon a default in payments. In other words, the borrower is behind in the monthly payments and has not brought the loan current after a request to do so. In a reverse mortgage, the borrower does not make monthly payments, so the reason for default is different. Under North Carolina General Statute 53-267, there are six different ways that a lender can establish a default in the reverse mortgage. Those six triggering events are as follows:
1. Borrower fails to maintain the property; or
2. Borrower sells the property or conveys title to a third party; or
3. Death of the borrower and no surviving spouse uses the property as a primary residence; or
4. Borrower fails to reside in the property as the primary residence for a period of twelve (12) consecutive months due to a physical or mental illness; or
5. For reasons other than physical or mental illness, borrower fails to use the property as the primary residence for a period of 180 consecutive days, and the property is not used as the primary residence of at least one other borrower, and the lender has not given written permission to abandon the property as the primary residence; or
6. Borrower fails to maintain property taxes, property insurance, and/or property assessments.
Areas of Note in Reverse Mortgage Foreclosures in North CarolinaI have found that a fair number of reverse mortgage foreclosures are filed because of simple oversight. For example, reverse mortgage lenders send out a notice once a year asking the borrower to certify that the property is still being used as a primary residence. If this form is not completed and sent back to the lender, a default notice may be mailed for failure to occupy the property as the primary residence. The borrower may be living in the home and still get a notice that the loan is in default. Other common issues arise regarding property taxes and payment of insurance premiums. In many cases, these payments have been made but the lender is not aware. Good record keeping can help the borrower in many of these situations.
Even though there are more ways for a reverse mortgage to be declared in default, North Carolina does offer the borrower some protection not offered in a typical residential foreclosure. One such example of this is found in North Carolina General Statute 53-268. This statute requires a lender to provide at least ninety (90) days’ notice to a borrower before initiating a foreclosure. The traditional mortgage foreclosure brought under Chapter 45 of the North Carolina general statutes permits half that time. In addition to any requirements under state law, a large percentage of reverse mortgages are backed, owned, or controlled by investors that require additional steps to be taken by a lender before foreclosing on a reverse mortgage.
If you are a senior and find yourself in the unfortunate situation of defending against a foreclosure of a reverse mortgage, it is important to seek the advice of an attorney that understands these issues to make sure your rights are protected. The highly skilled and experienced team of attorneys at McGrath & Spielberger, PLLC are here to help when you need legal assistance. If you are facing a reverse mortgage foreclosure or have been sent a notice of default for a reverse mortgage, please complete our confidential client intake form today.