§ 45-21.38A. Deficiency judgments abolished where mortgage secured by primary residence.
§ 45‑21.38A. Deficiencyjudgments abolished where mortgage secured by primary residence.
(a) As used in thissection, the term "nontraditional mortgage loan" means a loan inwhich all of the following apply:
(1) The borrower is anatural person.
(2) The debt is incurredby the borrower primarily for personal, family, or household purposes.
(3) The principal amountof the loan does not exceed the conforming loan size for a single familydwelling as established from time to time by Fannie Mae.
(4) The loan is securedby: (i) a security interest in a manufactured home, as defined in G.S. 143‑145,in the State that is or will be occupied by the borrower as the borrower'sprincipal dwelling; (ii) a mortgage or deed of trust on real property in theState upon which there is located an existing structure designed principallyfor occupancy of from one to four families that is or will be occupied by theborrower as the borrower's principal dwelling; or (iii) a mortgage or deed oftrust on real property in the State upon which there is to be constructed usingthe loan proceeds a structure or structures designed principally for occupancyof from one to four families that, when completed, will be occupied by theborrower as the borrower's principal dwelling.
(5) The terms of theloan: (i) permit the borrower as a matter of right to defer payment ofprincipal or interest; and (ii) allow or provide for the negative amortizationof the loan balance.
(b) Except as providedin subdivision (6) of subsection (c) of this section, this section applies onlyto the following loans:
(1) A loan originated onor after January 1, 2005, that was at the time the loan was originated a ratespread home loan as defined in G.S. 24‑1.1F.
(2) A loan secured bythe borrower's principal dwelling, which loan was modified after January 1,2005, and became at the time of such modification and as a consequence of suchmodification a rate spread home loan.
(3) A loan that was anontraditional mortgage loan at the time the loan was originated.
(4) A loan secured bythe borrower's principal dwelling, which loan was modified and became at thetime of such modification and as a consequence of such modification anontraditional mortgage loan.
(c) This section doesnot apply to any of the following:
(1) A home equity lineof credit as defined in G.S. 45‑81(a).
(2) A construction loanas defined in G.S. 24‑10(c).
(3) A reverse mortgageas defined in G.S. 53‑257 that complies with the provisions of Article 21of Chapter 53 of the General Statutes.
(4) A bridge loan with aterm of 12 months or less, such as a loan to purchase a new dwelling where theborrower plans to sell his or her current dwelling within 12 months.
(5) A loan made by anatural person who makes no more than one loan in a 12‑month period andis not in the business of lending.
(6) A loan secured by asubordinate lien on the borrower's principal dwelling, unless the loan was madecontemporaneously with a rate spread home loan or a nontraditional mortgageloan that is subject to the provisions of this section.
(d) In addition to anystatutory or common law prohibition against deficiency judgments, the followingshall apply to the foreclosure of mortgages and deeds of trust that secureloans subject to this section:
(1) For mortgages anddeeds of trust recorded before January 1, 2010, the holder of the obligationsecured by the foreclosed mortgage or deed of trust shall not be entitled toany deficiency judgment against the borrower for any balance owing on suchobligation if: (i) the real property encumbered by the lien of the mortgage ordeed of trust being foreclosed was sold by a mortgagee or trustee under a powerof sale contained in the mortgage or deed of trust; and (ii) the real propertysold was, at the time the foreclosure proceeding was commenced, occupied by theborrower as the borrower's principal dwelling.
(2) For mortgages anddeeds of trust recorded on or after January 1, 2010, the holder of theobligation secured by the foreclosed mortgage or deed of trust shall not beentitled to any deficiency judgment against the borrower for any balance owingon such obligation if: (i) the real property encumbered by the lien of themortgage or deed of trust being foreclosed was sold as a consequence of ajudicial proceeding or by a mortgagee or trustee under a power of salecontained in the mortgage or deed of trust; and (ii) the real property soldwas, at the time the judicial or foreclosure proceeding was commenced, occupiedby the borrower as the borrower's principal dwelling.
(e) The court may, in itsdiscretion, award to the borrower the reasonable attorneys' fees actuallyincurred by the borrower in the defense of an action for deficiency if: (i) theborrower prevails in an action brought by the holder of the obligation securedby the foreclosed mortgage or deed of trust to recover a deficiency judgmentfollowing the foreclosure of a loan to which this section applies; and (ii) thecourt rules that the holder of the obligation secured by the foreclosedmortgage or deed of trust is not entitled to a deficiency judgment under theprovisions of this section. The amount of attorneys' fees to be awarded shallbe determined without regard to the provisions of the loan documents, theprovisions of G.S. 6‑21.2, or any statutory presumption as to the amountof such attorneys' fees. (2009‑441, s. 1.)