Foreclosure bill could help more than 25,000 families

Gov. Mike Easley has signed three bills to reduce the number of home foreclosure filings, including one that requires banks to provide 45 days' notice before filing a foreclosure.

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RALEIGH, N.C. — Gov. Mike Easley signed three bills Monday to slow down home-foreclosure filings, including one that requires lenders to provide 45 days' notice before a foreclosure is filed.

Easley signed a bill establishing the North Carolina Foreclosure Prevention Project, under which both homeowners and the state's bank commissioner must receive 45 days' notice before a foreclosure is filed.

The law also allows the bank commissioner to extend any foreclosure-filing notice period by 30 days.

The state would use that time to negotiate with the homeowner and mortgage holder on a loan interest rate and payments.

"This is a common-sense solution," said Sen. Walter Dalton, D-Cleveland. "It is basically a time out to say, 'Let's see if there is a way to work it out.' It's very productive."

The program applies only to sub-prime mortgages and to families and is not designed to bail out investors, said Rep. Dan Blue, D-Wake, one of the bill's key sponsors.

"We don't want any foreclosures to occur because they displace families, and when they displace families they start displacing neighborhoods," Blue said.

Easley said about 50,000 families could be at risk of foreclosure in the next year. The law could help more than half.

"The program is the first of its kind in the nation that makes sure homeowners and lenders avoid foreclosures, where everyone ends up a loser," Easley said. "Our goal is to help bring borrowers and lenders together so that the family gets to keep their home and the bank does not lose money on the loan."

When banks foreclose, they lose about 40 percent on the loan, Easley said.

The first phase of the plan will go into effect Nov. 1.

Easley also signed two other bills Monday, one of which eliminates rate-spread premiums – also known as yield spread premiums – that go to mortgage brokers.

Critics say these payments give brokers an incentive to charge higher fees with no benefit to the consumer, while supporters say it is a legitimate way for borrowers to spread out mortgage-broker fees over the life of a loan.

The third bill requires individuals and companies servicing loans in North Carolina to register and make reports to the bank commissioner.

Home foreclosures in July the state skyrocketed 127 percent from a year earlier and were 24 percent higher than in June, according to RealtyTrac, a California-based foreclose tracking system.

That's about one in every 936 properties.

The surge in North Carolina, which ranks 25th among the 50 states in foreclosures but is 10th in terms of population, reflected a nationwide surge as the U.S. housing market continued to struggle.

Nationwide, more than 272,000 homes received at least one foreclosure-related notice in July, up 55 percent from about 175,000 in the same month last year and up 8 percent from June, RealtyTrac said. That means one in every 464 U.S. households received a foreclosure filing last month.