Lawmakers Weigh North Carolina Home Loan Reform

Willie Ricks fell behind three months on his North Carolina mortgage payments while on strike last fall at the Goodyear Tire & Rubber Co.

He and his wife ended up owing their bank $8,001, including late fees and other charges. When the Fayetteville couple mailed payments to stave off foreclosure, the bank routed the money to a “suspense” account instead of applying it to their balance.

“All of a sudden, bam! I guess they heard the plant was on strike and this is the time to take someone’s house away from them,” Ricks told the Fayetteville Observer after a foreclosure hearing in December.

As foreclosures skyrocket across the state, lawmakers are considering new regulations meant to help families like the Ricks avoid losing their homes.

The details of one bill — the first in North Carolina to comprehensively address what are called servicing fees — are being hashed out this week.

Consumer advocates say new fees by mortgage lenders and servicing companies make it hard to catch up on delinquent home loans, contributing to the onslaught of foreclosures.

The legislation, Senate Bill 1264, clarifies the types of fees and charges that would be allowed and requires North Carolina home loan providers to apply payments immediately.

Ricks eventually crossed the picket line and pulled from his savings to save his home off Hoke Loop Road. Many other families aren’t so lucky.

A Fayetteville Observer investigation found up to 1,100 homes in Cumberland County fell into foreclosure and were sold at courthouse auctions in recent years.

Nearly half of the failed home mortgage loans were on homes bought or had been involved in mortgage refinancing less than four years earlier.

As many as a third were within three years, strongly suggesting that buyers either got home mortgage loans they couldn’t afford, or stumbled on adjustable interest rates.

Overall, nearly 5,000 homes in Cumberland County sold at auctions from 2001 through 2005 due to mortgage trouble, the analysis found.

Such turnover has eroded property values, ruined family finances and spawned a frenzy of risky investing that sometimes leads to more homes lost.

Another bill pending in the General Assembly could help track unscrupulous brokers by requiring all deeds of trust — documents for mortgage loans filed at courthouses — to list the mortgage broker’s name and license number.

And mortgage fraud would become a felony under another proposed statute, supported by the state attorney general.

Yet other reforms haven’t made it so far, including added defenses for homeowners when a home loan lender sues to foreclose.

Also, the bills don’t tackle questions of how mortgage lenders determine if borrowers are capable of paying their home loans.

Continue reading in the Fayetteville Observer …