Author: Aaron Seagroves, Esq.
The rules governing non-judicial foreclosures in North Carolina have undergone drastic changes in wake of the recently published opinion, In re Foreclosure of Lucks, released by the North Carolina Supreme Court. Accordingly, the North Carolina Supreme Court has announced that the Rules of Civil Procedure applicable to formal judicial actions, no longer applies to non-judicial foreclosure proceedings, brought pursuant to a power of sale. Going forward, unless explicitly engrafted into the statute, Chapter 45 of the North Carolina General Statutes provides the comprehensive and exclusive statutory framework for such actions, including not only at the initial hearing before the clerk of court, but also on appeals from the clerk’s decision.
What does this mean for creditors?
The Court gave several reasons why a creditor may choose not to proceed with the foreclosure hearing. The Court reasoned “a debtor may seek to remit late mortgage payments, or changes in law may alter foreclosure requirements, thus affecting the creditor’s ability to proceed”. Accordingly, the Court held that a decision to refrain from proceeding is not a “dismissal” but simply a withdrawal of the notice and has no collateral consequence. If a creditor chooses to proceed to a hearing but the clerk does not find the evidence presented to be adequate to “authorize” the foreclosure sale, such a finding does not implicate res judicata or collateral estoppel. In such instances, while the creditor may not proceed again with a non-judicial foreclosure on the same default, the creditor still has options: either proceed judicially or non-judicially on another default.
In practice, this means that creditors should expect to see fewer dismissals in non-judicial foreclosures under a power of sale, going forward.