The laweliminates balloon payments -- large, one-time charges at the end of the contract which may force the homeowner to refinance the loan. Anyone who borrowed money prior to this law is out of luck.
One man needs the extra protection now.
Sam Smith, 69, was proud when he paid off his five-year home loan two months early. That is, until he found out that he still owed the bank a balloon payment of more than $10,000.
Smith says he specifically asked for higher monthly payments so that he could avoid that expense at the end of the contract.
"I would have never thought a bank would do a person that way," he says.
The balloon payment is on the contract Smith signed. The problem is, he cannot read.
"They know I couldn't read, the lawyer knew I couldn't read." he says.
"There were at least two documents at the time of the closing, both of which disclosed the 5-year term with the note at the end -- the note and the disclosure statement," says John Fleming of Centura Bank.
Smith's original agreement was with Unity Bank, now Centura Bank.
John Fleming, the bank's attorney, says it is important for people to understand the terms of their loan.
"We would do everything that we can to make sure that our loan customers understand all the terms of the loan. This particular loan was closed in his attorney's office," says Fleming.
The bank is willing to refinance the balance of Smith's loan. But foreclosure proceedings have already started. Without a resolution, Smith will lose his home next month.
"I got nowhere else to go. This is all I got," he says.
Smith's attorney has filed a complaint about the situation with the North Carolina Banking Commission and the Consumer Protection Division of theN.C. Attorney General's Office.
Centura Bank says it is ready and willing to work with Smith to resolve the problem.