A BILL TO BE ENTITLED
AN ACT to create an emergency program to reduce foreclosures and to authorize the commissioner of banks to use funds for foreclosure prevention.
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)	Act as a mortgage servicer. – To engage, whether for compensation or gain from another or on its own behalf, in the business of receiving any scheduled periodic payments from a borrower pursuant to the terms of any mortgage 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 pursuant to the mortgage loan, the mortgage servicing loan documents or servicing contract.
(2)	Mortgage lender. – A person engaged in the business of making mortgage loans for compensation or gain.
(3)	Mortgage servicer. – A person who directly or indirectly acts as a mortgage servicer as that term is defined in subdivision (1) of this section or who otherwise meets the definition of the term 'servicer' in the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(i), with respect to mortgage loans.
(4)	Subprime loan. – A loan, originated on or after January 1, 2005, but before December 31, 2007, 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. The Commissioner shall provide the chart at least 60 days prior to the effective date of this act.
"§ 45‑102.  Pre‑foreclosure notice for subprime loans. 
At least 45 days prior to the filing of a notice of hearing in a foreclosure proceeding, mortgage servicers of subprime loans shall send written notice by mail to the last known address of the borrower to inform the borrower of the availability of resources to avoid foreclosure, including:
(1)	An itemization of all past due amounts causing the loan to be in default.
(2)	An itemization of any other charges that must be paid in order to bring the loan current.
(3)	A statement that the borrower may have options available other than foreclosure, and that the borrower may discuss available options with the mortgage lender, the mortgage servicer, or a counselor approved by the U.S. Department of Housing and Urban Development.
(4)	The address, telephone number, and other contact information for the mortgage lender, the mortgage servicer, or the agent for either of them who is authorized to attempt to work with the borrower to avoid foreclosure.
(5)	The name, address, telephone number, and other contact information for one or more HUD approved counseling agencies operating to assist borrowers in North Carolina to avoid foreclosure.
(6)	The address, telephone number, and other contact information for the consumer complaint section of the Office of Commissioner of Banks.
"§ 45‑103.  Pre‑foreclosure information to be filed with the Administrative Office of the Courts for certain subprime loans.
(a)	Within three business days of mailing the notice required by G.S. 45‑102, the mortgage servicer shall file certain information with the Administrative Office of the Courts. The filing shall be in an electronic format, as designated by the Administrative Office of the Courts, and shall contain the name and address of the borrower and the date the notice was mailed to the borrower.
(b)	As permitted by applicable State and federal law, optional information may be requested from the mortgage servicer to facilitate further review by the State Foreclosure Prevention Project described in G.S. 45‑104. The nature of the optional information requested shall be determined in connection with the design of the database established by subsection (c) of this section. This optional information shall be used by the State Foreclosure Prevention Project to prioritize efforts to reach borrowers most likely to avoid foreclosure and to prevent delay for defaults where foreclosure is unavoidable.
(c)	No later than October 1, 2008, the Administrative Office of the Courts shall establish an internal database to track information provided in this section. The Commissioner of Banks shall design and develop this database, in consultation with the Administrative Office of the Courts, in a manner to promote the efforts of the State Foreclosure Prevention Project. Only the Administrative Office of the Courts, the Office of Commissioner of Banks, and the clerk of court as provided by G.S. 45‑107 shall have access to the database.
"§ 45‑104.  State Foreclosure Prevention Project.
The Commissioner of Banks is authorized to establish the State Foreclosure Prevention Project. The purpose of the Project is to seek solutions to avoid foreclosures for certain subprime loans. In developing the Project, the Commissioner may include input from HUD approved housing counselors, community organizations, state agencies, mortgage lenders, mortgage servicers, and other partners.
"§ 45‑105.  Extension of foreclosure process.
The Commissioner of Banks shall review information provided in the database created by G.S. 45‑103 to determine which subprime loans are appropriate for efforts to avoid foreclosure. If the Commissioner reasonably believes, based on a full review of the loan information, the mortgage servicer's loss mitigation efforts, the borrower's capacity and interest in staying in the home, and other appropriate factors, that further efforts by the State Foreclosure Prevention Project offer a reasonable prospect to avoid foreclosure, the Commissioner shall have the authority to extend the allowable filing date for any foreclosure proceeding by up to 30 days beyond the earliest filing date established by the pre‑foreclosure notice. If the Commissioner makes the determination that a loan is subject to this section, the Commissioner shall notify the borrower, mortgage servicer and the Administrative Office of the Courts.
"§ 45‑106.  Use and privacy of records.
The data provided to the Administrative Office of the Courts pursuant to G.S. 45‑103 shall be exclusively for the use and purposes of the State Foreclosure Prevention Project developed by the Commissioner of Banks in accordance with G.S. 45‑104. The information provided to the database is not a public record, except that a mortgage lender and a mortgage servicer shall have access to the information submitted only with regard to its own loans. Provision of information to the Administrative Office of the Courts for use by the State Foreclosure Prevention Project shall not be considered a violation of G.S. 53B‑8. A mortgage servicer shall be held harmless for any alleged breach of privacy rights of the borrower with respect to the information the mortgage servicer provides in accordance with this Article.
"§ 45‑107.  Foreclosure filing.
(a)	For the duration of the program authorized by this Article, foreclosure notices filed on subprime loans on or after November 15, 2008, shall contain a certification by the filing party that the pre‑foreclosure notice required by G.S. 45‑102 and the pre‑foreclosure information required by G.S. 45‑103 were provided in accordance with this Article and that the periods of time established by the Article have elapsed.
(b)	The Clerk of Superior Court or other judicial officer may have access to the pre‑foreclosure database to confirm information provided in subsection (a) of this section. A materially inaccurate statement in the certification shall be cause for dismissal without prejudice of any foreclosure proceeding initiated by the mortgage servicer and for payment by the filing party of costs incurred by the borrower in defending the foreclosure proceeding."
SECTION 2.  G.S. 45‑21.16 is amended by adding a new subsection to read:
"(c2)	In any foreclosure filed on or after November 15, 2008, where the underlying mortgage debt is a subprime loan as defined in G.S. 45‑101(b), the notice required by subsection (b) of this section shall contain a certification by the filing party that the pre‑foreclosure notice and information required by G.S. 45‑102 and G.S. 45‑103, were provided in all material respects and that the periods of time established by Article 11 of this Chapter have elapsed."
SECTION 3.  G.S. 45‑21.16(d) reads as rewritten:
"(d)	The hearing provided by this section shall be held before the clerk of court in the county where the land, or any portion thereof, is situated. In the event that the property to be sold consists of separate tracts situated in different counties or a single tract in more than one county, only one hearing shall be necessary. However, prior to that hearing, the mortgagee or trustee shall file the notice of hearing in any portion of the property to be sold is located. Upon such hearing, the clerk shall consider the evidence of the parties and may consider, in addition to other forms of evidence required or permitted by law, affidavits and certified copies of documents. If the clerk finds the existence of (i) valid debt of which the party seeking to foreclose is the holder, (ii) default, (iii) right to foreclose under the instrument, (iv) notice to those entitled to such under subsection (b), and (v) that the underlying mortgage debt is not a subprime loan as defined in G.S. 45‑101(b), or if the loan is a subprime loan under G.S. 45‑101(b), that the pre‑foreclosure notice under G.S. 45‑102 was provided in all material respects and that the periods of time established by Article 11 of this Chapter have elapsed, then the clerk shall authorize the mortgagee or trustee to proceed under the instrument, and the mortgagee or trustee can give notice of and conduct a sale pursuant to the provisions of this Article. A certified copy of any authorization or order by the clerk shall be filed in any other county where any portion of the property to be sold is located before the mortgagee or trustee may proceed to advertise and sell any property located in that county. In the event that sales are to be held in more than one county, the provisions of G.S. 45‑21.7 apply.
SECTION 4.(a)  The Commissioner of Banks shall use six hundred thousand dollars ($600,000) of the funds available to the State Banking Commission in the 2008‑2009 fiscal year to make grants to nonprofit counseling agencies in the State. The Commissioner of Banks shall use four hundred thousand dollars ($400,000) of the funds available to the State Banking Commission in the 2008‑2009 fiscal year to implement this Article.
SECTION 4.(b)  The Office of the Commissioner of Banks shall report to the General Assembly describing the operation of the program established by this act not later than May 1 of each year until the funds are completely disbursed from the reserve. Information in the report shall be presented in aggregate form, and may include the number of clients helped, the effectiveness of the funds in preventing foreclosure, recommendations for further efforts needed to reduce foreclosures, and provide any other aggregated information the Commissioner determines is pertinent or that the General Assembly requests.
SECTION 5.  Section 4 of this act becomes effective July 1, 2008. The remainder of this act becomes effective November 1, 2008, and expires on October 31, 2010.