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Short Title:     Emergency Foreclosure Reduction Program.



Representatives Blue, Church, Carney, Weiss (Primary Sponsors);  Bryant, Coates, Coleman, Current, Faison, Fisher, Glazier, Goforth, Hall, Harrison, Jones, Lucas, Luebke, Ross, Wainwright, Womble, and Wray.

Referred to:

Judiciary II, if favorable, Appropriations.

May 28, 2008


AN ACT to create an emergency program to reduce foreclosures and to appropriate funds to the north carolina housing finance agency to establish a foreclosure prevention reserve.

The General Assembly of North Carolina enacts:

SECTION 1.  Chapter 45 of the General Statutes is amended by adding a new Article to read:

"Article 11.

"Emergency Program to Reduce Foreclosures.

" 45-100.  Title.

This Article shall be known as the Emergency Program to Reduce Foreclosures Act.

" 45-101.  Definitions.

The following definitions apply throughout this Article:

(1)       Mortgage servicer. - A person who is in the business of receiving any scheduled periodic payment from a borrower pursuant to the terms of any loan, including amounts for escrow accounts, and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required under the terms of the mortgage servicing loan document or servicing contract.

(2)       Qualifying loan. - A mortgage loan with all of the following characteristics:

a.         The property securing the loan is occupied by the mortgagor at the time of the submission required in G.S. 45-102 as the mortgagor's principal residence.

b.         The loan is a subprime loan.

c.         The mortgagor has not received assistance under the Home Protection Pilot Program administered by the North Carolina Housing Finance Agency.

d.         The mortgagor has not previously received assistance under this Article for a prior delinquency.

e.         Efforts by the Commissioner of Banks to encourage communication have a realistic likelihood of preventing foreclosure as determined by the Commissioner.

(3)       Recently-originated. - A subprime loan originated on or after January 1, 2005, but no later than December 31, 2007.

(4)       Subprime loan. - A loan that would meet the definition of a rate spread home loan under G.S. 24-1-1F(a)(7), if that section had been in effect when the loan was originated. A mortgage servicer may rely on a chart reflecting the appropriate interest rate triggers for rate spread home loans for each day of the period covered by this Article provided by the Commissioner of Banks for the purposes of determining if a loan is a subprime loan covered by this Article.

" 45-102.  Creation of database of subprime loans facing foreclosure.

No later than September 1, 2008, the Commissioner of Banks shall create a database comprised of qualifying loans in which a foreclosure filing is reasonably anticipated as described in G.S. 45-103. The Commissioner shall utilize this database in order to encourage communications between mortgage servicers and willing homeowners.

" 45-103.  Submission of information to the database.

Mortgage servicers of recently-originated subprime home loans shall submit information required by the Commissioner of Banks to the database created pursuant to G.S. 45-102 at least 30 days prior to the institution of any foreclosure proceeding. The Commissioner shall use the information to determine if a loan is a qualifying loan. The Commissioner shall publicly provide the form, manner, and content of the filing no later than 30 days prior to the date the database becomes active.

" 45-104.  Assistance for qualifying loans.

In the case of a qualifying loan, the Commissioner of Banks shall notify the mortgage servicer, the homeowner, and other parties, as appropriate, that the loan is a qualifying loan and shall make efforts to facilitate communication between the parties to avoid foreclosure. The mortgage servicer shall not institute foreclosure proceedings for at least 60 days after receiving notice that the loan is a qualifying loan, in order to allow the parties to determine if there is an alternative to foreclosure.

" 45-105.  Notification.

For loans that are not qualifying loans, the Commissioner of Banks shall notify the holder or the mortgage servicing agent of the determination that the loan is not a qualifying loan within 30 days of the receipt of the initial notice required by this Article so as not to disrupt foreclosure proceedings for loans not receiving assistance under this program.

" 45-106.  Emergency powers of the Commissioner of Banks.

The Commissioner of Banks shall be exempt from rulemaking under Chapter 150B of the General Statutes solely with regard to establishing procedures to implement the purposes of this Article. The Commissioner may employ agents to act on behalf of the Commissioner to accomplish the purposes of this Article.

" 45-107. Privacy of records.

The Commissioner of Banks shall protect the privacy of personal financial information provided in accordance with this Article that is not otherwise a public record, and such information shall not be released to the public. A mortgage servicer shall be held harmless by the Commissioner for any breach of privacy rights of the mortgagor with respect to the information the mortgage servicer provides to the Commissioner in accordance with G.S. 45-103.

"  45-108.  Foreclosure filing.

(a)       For the duration of this program, foreclosure notices filed on or after September 1, 2008, shall contain a certification by the filing party that the loan was properly submitted to the database as required by G.S. 45-103 and that the loan is not currently receiving assistance under G.S. 45-104 or that the loan is not a qualifying loan.

(b)       An inaccurate statement in the certification required by subsection (a) of this section shall be cause for the dismissal of any foreclosure proceeding initiated by the mortgage servicer and a payment by the filing party of costs incurred by the mortgagor in defending the foreclosure proceeding."

SECTION 2.  (a) There is appropriated from the General Fund to the North Carolina Housing Finance Agency the sum of one million dollars ($1,000,000) for the 2008-2009 fiscal year to establish the Foreclosure Prevention Reserve. The Reserve will be available as needed to reimburse local agencies for counseling services to homeowners whose homes are at risk of foreclosure. The Reserve may only be used when there are no other sources of funds available to provide these services.

(b)       The Reserve will be set up in the Housing Finance Agency's special fund and shall not revert at the end of the fiscal year.

(c)       The North Carolina Housing Finance Agency shall report to the Joint Legislative Commission on Governmental Operations by May 1 of each year until the funds are completely disbursed from the Reserve. The report shall include the number of clients helped, the effectiveness of the Reserve in preventing foreclosure, and provide any other information that the agency determines is pertinent or that the General Assembly requests.

SECTION 3.  The Commissioner of Banks shall report to the General Assembly on the costs and benefits of the Emergency Program to Reduce Foreclosures on or before March 1, 2009 and 2010, along with any recommendations for further efforts needed to reduce foreclosures.

SECTION 4.  Sections 1 and 3 of this act become effective July 1, 2008, and expire August 31, 2010. The remainder of this act becomes effective July 1, 2008.