Foreclosure Laws: NC vs. SC
Question
How are mortgage
liens treated?
How are
mortgages/deeds
foreclosed?
What are the legal
instruments that
establish a
mortgage?
How long does it
take to foreclose a
property?
NC
North Carolina is generally known as a title theory state where the
property title remains in trust until payment in full occurs for the
underlying loan. The document that secures the title is usually called
a deed of trust and in North Carolina the mortgage serves the same
purpose and generally contains the same terms as a deed of trust and
serves the same function in a judicial foreclosure.
The primary method of foreclosure in North Carolina involves what is
known as non-judicial foreclosure. This type of foreclosure does not
involve court action but requires notice commonly called a sale under
the power of sale. When the mortgage is initially signed it will usually
contain a provision called a power of sale clause which upon default
allows an attorney to foreclose on the property in order to satisfy the
underlying defaulted loan which is sometimes referred to as a bond.
Because this is a non-judicial remedy there are very stringent notice
requirements and the legal documents are required to contain the
power of sale language in order to use this type of foreclosure
method.
In North Carolina, the lenders can also go to court in what is known
as a judicial foreclosure proceeding where the court must issue a
final judgment of foreclosure. This process is called foreclosure by
action. The property is then sold as part of a publicly noticed sale by
the sheriff. A complaint is filed in court along with what is known a lis
pendens. A lis pendens is a recorded document that provides public
notice that the property is being foreclosed upon.
The documents are known as the mortgage or in a commercial
transaction, a security agreement. Sometimes the mortgage
document is combined with the security agreement. A mortgage is
filed to evidence the underlying debt and terms of repayment, which
is set forth in the note.
Depending on the timing of the various required notices, it usually
takes approximately 90-120 days to effectuate an uncontested nonjudicial foreclosure. This process may be delayed if the borrower
contests the action in court, seeks delays and adjournments of sales,
or files for bankruptcy.
SC
South Carolina is known as a lien theory state where the property
acts as security for the underlying loan. The document that places the
lien on the property is called a mortgage.
In South Carolina, the lenders go to court in what is known as a
judicial foreclosure proceeding where the court must issue a final
judgment of foreclosure. The property is then sold as part of a
publicly noticed sale. The court with jurisdiction over a foreclosure is
known as the Circuit Court. A complaint is filed in court along with a
lis pendens.
Same as NC
Depending on the court schedule, it usually takes approximately 150180 days to effectuate an uncontested foreclosure. This process may
be delayed if the borrower contests the action, seeks delays and
adjournments of hearings, or files for bankruptcy. Borrowers must
receive a notice of sale which must be published for at least three (3)
consecutive weeks in a newspaper of general circulation. This notice
includes posting at the courthouse and other locations at least three
(3) weeks before the sale. South Carolina has a process called an
Is there a right of
redemption?
Are deficiency
judgments
permitted?
What statutes
govern
foreclosures?
Yes. North Carolina has a very short statutory right of redemption,
which would allow a party whose property has been foreclosed to
reclaim that property by making payment in full of the sum of the
unpaid loan plus costs within ten (10) days of the sale through the
upset bid process, where any bidder can increase the sale bid by 5%
in order to become the winning bidder at the sale.
Yes. A deficiency judgment may be obtained when a property in
foreclosure is sold at a public sale for less than the loan amount
which the underlying mortgage secures. Deficiency judgments are
referenced in North Carolina General Statutes, Chapter 45, Article 2B
§45-21.36 and the mortgagor has the right to prove the fair value of
the property as a defense to any deficiency based on the sale price.
The laws that govern North Carolina non-judicial foreclosures are
found in North Carolina General Statutes, Chapter 45 (Mortgages and
Deeds of Trust), Article 2, Article 2A as referenced in §45-4 to §4521.38
application for an order of appraisal. A borrower usually requests this
process where an independent appraiser determines the high value
of the property which may be substituted for the sale amount if the
lender is seeking a deficiency. Unless the property is a residence or
the subject of a consumer credit transaction these appraisal rights
may be waived.
No. South Carolina does not have a statutory right of redemption,
which allows a party whose property has been foreclosed to reclaim
that property by making payment in full of the sum of the unpaid
loan plus costs.
Yes. A deficiency judgment may be obtained when a property in
foreclosure is sold at a public sale for less than the loan amount
which the underlying mortgage secures. This means that the
borrower still owes the lender for the difference between what the
property sold for at auction and the amount of the original loan.
Deficiency judgments are subject to appraisal rights as noted above.
The laws that govern South Carolina foreclosures are found in South
Carolina Code of Laws (2004) Title 29 (Mortgages and Other Liens),
Chapter 3, Article 7 (Foreclosures) (Section 29-3-610 et. seq.).