Thursday, December 12, 2019

The Noteholder Changed After Your Foreclosure Was Filed, What Does That Mean to Your Case?

Written by Attorney Mike Spicer

    Within the mortgage servicing industry, it is commonplace for a noteholder to change. Clients often wonder what the impact is on their particular case. The short answer is that it usually has little to no impact on the legal proceeding.

    Pursuant to North Carolina General Statute §45-21.16(d), the Clerk of Court is charged with making a series of findings to permit a foreclosure sale to occur. The Clerk is required to make these findings at the foreclosure hearing

    When a noteholder changes, many people think that means the foreclosure should stop or that the case cannot go forward; however, that is typically not the case. The reason for this is that the Clerk is required to make a finding that there is a valid debt of which the party seeking to foreclose is the holder. The Clerk may consider evidence to establish this; the evidence is typically an affidavit and copies of the documents in question.  Since the Clerk reviews the evidence at the hearing itself, it usually does not matter if the noteholder changed between filing the foreclosure and going to hearing. The Clerk only needs to find that the party seeking to continue the foreclosure has presented sufficient evidence at the hearing for the case to proceed. The Clerk will be looking for an affidavit from the current noteholder and a way to establish that the party has stepped into the shoes of the party that filed the case. So long as the noteholder can show that they are the current holder of the note, the case is entitled to proceed.

    This specific scenario was discussed in the case In re Foreclosure of Fortescue, (80 N.C. App. 29). This case dealt with a challenge from a borrower when the noteholder changed during the course of the legal proceeding. In this case, the Notice of Hearing named one noteholder but another noteholder presented an affidavit at the foreclosure hearing. Based on the facts of the case, the court found in pertinent part that the North Carolina statutes do not prohibit an assignment or negotiation of the note during the interval between filing the case and conducting the hearing. 

    This does not mean that any case should go forward without a thorough review from a knowledgeable attorney. If the documents are not in order or are incomplete, it can jeopardize the ability for the Clerk to make the appropriate findings and can lead to a withdrawal or dismissal of the case. The attorneys at McGrath & Spielberger are well versed in this area of the law and have a deep understanding of the legal requirements to allow a foreclosure to occur. We are happy to review documents for you and provide an informed legal opinion for your case. If you find yourself in a foreclosure with a noteholder changing, or any foreclosure case for that matter, please contact our office for assistance.

Tuesday, November 19, 2019

Arbitration Agreement: How to Get to Arbitration if A Lawsuit Was Filed First

Attorney Jason McGrath shares some items to consider when your contract has an arbitration provision but the other party has already filed a formal lawsuit in the court system in this short video.

 Click this link to view on YouTube, or watch below.

Here are some of the key points contained in the video:

What do you do if the other party has already filed a formal lawsuit in the court system?
  1. You go to the other side and point out that there is an arbitration clause in the contract and demand it be honored.
  2. If the other side refuses to halt the lawsuit and go to arbitration, you file a motion asking the court to dismiss or stay the lawsuit and order arbitration.
  3. This type of a motion needs to be filed before the case goes to far in the formal court system.
  4. If the court believes the arbitration clause to be valid, it will typically order arbitration and halt the lawsuit in the meantime.
  5. More often than not, arbitration clauses are enforced by courts.

You should get advice from an attorney to assist in handling litigation issues like arbitration.

If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio, or Tennessee we invite you to fill out our confidential client form for possible legal assistance.

Wednesday, October 23, 2019

S-Corp Tax Election for LLC

S-Corp Tax Election: Is it Right for Your LLC?

As an attorney who happens to have an MBA and some specific tax law knowledge, and one who advises businesses on both day to day issues and tax matters, I know that if you’ve chosen (or will choose) an LLC as your business structure, it’s likely due to some combination of the liability protection an LLC offers, the operations and internal organization flexibility it allows, and the tax advantages which can accompany it. One of those tax advantages of an LLC can be the election to be taxed as an “S-corp.”

business financial decision, finances, taxes, tax election

Keep in mind that, as we’ve previously discussed, one does not really “form an S-corp.” – this a tax classification, not a type of business organization. Once a corporation is formed, the shareholders can unanimously elect to “become” an S-corporation by filing Form 2253 with the IRS. The resulting S-corp. is a corporation that’s status is governed by Subchapter S of the Internal Revenue Code. If no election is made, then the corporation defaults to a “C-corporation” for tax purposes and is governed by Subchapter C of the Internal Revenue Code.

The traditional C-corporation’s net income is subject to a double tax at the entity level and individual level, while partnerships, LLC’s, sole proprietorships and S-corporations enjoy a pass-through status for income earned by the business. However, partnerships and sole proprietorships typically do not provide the limited liability protection desired by most small business owners. Based on these combined factors, the LLC with an S-corp. tax election is often a wise choice for business owners.

The IRS automatically treats any LLC with two or more members as a partnership and any sole member LLC as an entity disregarded as separate from its owner for federal income tax purposes. Either default treatment will provide pass through benefits to the owners of the LLC, while providing the limited liability protection. However, an LLC is allowed to make an election to be treated as an S-corporation for federal income tax purposes.

Why would an LLC want to choose to be taxed as an S-corp. rather than a partnership? There are numerous reasons for an LLC to choose to be taxed as an S-corp., including being able to pay wages and salaries to owners (which are taxed similar to wages paid to non-owner employees) but also allowing owners to be paid distributions / profits and the LLC not being federally taxed on those monies. Most experts state that the election to be taxed as an S-corp. allows the avoidance of “double taxation” as to the distributions / profit distributions. While the greatest tax benefits are typically by being an S-corp. which pays a higher proportion of monies to owners as distributions, owners who do work for the company are supposed to be paid a “reasonable salary” so that at least some payroll taxes are being paid for that individual and his/her work.

In addition to the impact that a parent – subsidiary LLC relationship can have on the possibility of selecting S-corp. tax status (see further down), an S-corp. election does allow less flexibility as far as distributions paid to owners. Typically, distributions paid to an owner must be proportional with that person’s ownership share; in other words, if Sally owns 60% of the LLC and John owns 40%, Sally should be receiving 60% of the distributions (but their salaries need not match up that same way).

If you are an existing LLC which is considering changing its tax classification, please keep in mind that, according to the IRS, an entity usually can only make such a change once every five (5) years. Be aware that some states do not recognize the S-corp. status / election and business income could be subject to double taxation at the state level.

If an LLC elects to be treated as an S-corp. for tax purposes, the LLC must comply with the same rigid ownership requirements applicable to qualifying for S-corporation tax status. This becomes an issue for the parent-subsidiary LLC relationship, as a subsidiary LLC that is wholly owned by the parent LLC cannot make the S-corp. election. One must be careful to avoid committing this error in electing tax treatment for any subsidiary LLC’s.

This is merely a starting point for a discussion of these issues, and the devil is certainly in the details as far as both the law and taxes. If you need advice regarding a tax situation, a distressed mortgage loan, or something similar, please don’t hesitate to request a consultation with a lawyer. The tax consequences of forming a business and electing tax treatment can be complicated and it is always best to contact a tax professional to address your specific situation.

Friday, September 27, 2019

Top 5 Reasons to Change Your Will

retired couple walking on a beach covered in the gold light of a sunset

Below we list the top five reasons to update your legal will, or at least consider changes. If you are unsure about will or estate planning process, you can consult with one of our law firm's experienced attorneys to help.

  1. You don’t have a will. (So having one would be a change!)

  2. Your marital status has changed. (Do you really still want your ex getting all your stuff?)

  3. You have moved to a new state. (It’s possible that not every part of your New York will would be enforceable once you get old & cranky, move to Florida, start playing golf 5 times a week and eat dinner at 4:30 p.m.)

  4. Your family has grown. (I’m mainly referring to having a child, not the 25 pounds you may have packed on.)

  5. You don’t like your family any longer. (Unfortunately, ill will – pun intended - within families is one of the primary motivators for will changes.)

McGrath & Spielberger, PLLC provides will services in North Carolina, South Carolina, Georgia, Florida, Tennessee and Ohio:

Wednesday, August 28, 2019

Interrogatories - How They Generally Work

Attorney Jason McGrath explains "Interrogatories" during litigation and how they generally work in a lawsuit in this short video.

Click here to watch on YouTube  -

Here are some of the key points contained in the video:
    1. Interrogatories are a list of written questions.
    2. The receiving party is to respond, typically within 30 days, to the questions or file an objection or series of objections.
    3. There is a rule limiting the number of questions that may be asked.
    4. The responses should be evaluated by the party that initiated the Interrogatories for accuracy and completeness and these issues can be questioned within the court system.
      If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio, or Tennessee we invite you to fill out our confidential client contact form for possible legal assistance.


      Wednesday, July 24, 2019

      Letter of Good Standing and Certificate of Existence

      This video contains helpful information for those going into business within the state of North Carolina including:
      • Certificate of Existence from the N.C. Secretary of State
      • Letter of Good Standing from the N.C. of Revenue

      Business law attorney Jason McGrath discusses Letters of Good Standing and Certificates of Existence for North Carolina businesses in this informational video.

      Click here to view on YouTube -

      If you are in need of legal assistance for your business in North Carolina, South Carolina, Tennessee, Georgia, Florida or Ohio, please fill out our confidential client intake form.

      Wednesday, June 5, 2019

      North Carolina Mortgage Servicers & the Duty to Disclose Fees

             As an experienced real estate, mortgage servicing, and foreclosure attorney, the issue of mortgage loan servicers’ failure to assess fees and notify borrowers in North Carolina is a problem area that I have encountered a significant number of times. North Carolina General Statute § 45-91  is set up to help borrowers understand fees that are assessed to their loans and to get timely notice of them.

             Every mortgage loan servicer must comply with this statute on every loan it services in North Carolina. The law does not limit this notice to loans that are in default or borrowers that have filed a bankruptcy. Pursuant to the law, the mortgage loan servicer must:
      • Assess any fee on the account within forty-five (45) days of it being incurred; and
      • Send a clear and concise written statement to the borrower, at their last known mailing address, within thirty (30) days of assessing the fee
      North Carolina law, mortgage loan servicer, mortgage fees, North Carolina General Statute 45 91

             Any failure by the mortgage servicer to comply with this law is deemed a waiver of the right to collect the fee from the borrower. This law is applicable to all fees assessed to a mortgage loan, including things like foreclosure fees, attorney’s fees, property inspections, property preservation fees, and any other fees permitted under the terms of the Promissory Note and Deed of Trust.

             Oftentimes, mortgage loan servicers include fees on the monthly statement mailed to borrowers. It is important that you view these statements to make sure you understand the fees and that everything assessed to your loan was done within the required timeframes. When borrowers have a loan go into default or file bankruptcy, mortgage loan servicers often stop sending periodic statements or notices to borrowers. Under North Carolina law, the mortgage servicer must still comply with this law or it waives the right to collect the fees. Please note that the waiver is only for fees that were not properly assessed and communicated, you will still be responsible for the principal, interest, and any escrow amounts due under the loan.

             A mortgage servicer’s failure to comply with this law can reduce amounts it claims you owe when trying to pay off a loan, or reinstate a loan that got behind on payments, or when you file bankruptcy. If you are struggling to pay your mortgage or are already behind, please feel free to contact our office for assistance.

            Key Excerpts from the statute are below.

      N.C.G.S. § 45-91.  Assessment of fees; processing of payments; publication of statements. A servicer must comply as to every home loan, regardless of whether the loan is considered in default or the borrower is in bankruptcy or the borrower has been in bankruptcy, with the following requirements:

      (1) Any fee that is incurred by a servicer shall be both:

             a. Assessed within 45 days of the date on which the fee was incurred. Provided, however, that attorney or trustee fees and costs incurred as a result of a foreclosure action shall be assessed within 45 days of the date they are charged by either the attorney or trustee to the servicer.

             b. Explained clearly and conspicuously in a statement mailed to the borrower at the borrower's last known address within 30 days after assessing the fee, provided the servicer shall not be required to take any action in violation of the provisions of the federal bankruptcy code. The servicer shall not be required to send such a statement for a fee that either:

                   1. Is otherwise included in a periodic statement sent to the borrower that meets the requirements of paragraphs (b), (c), and (d) of 12 C.F.R. § 1026.41.

                   2. Results from a service that is affirmatively requested by the borrower, is paid for by the borrower at the time the service is provided, and is not charged to the borrower's loan account.

      (3) Failure to charge the fee or provide the information within the allowable time and in the manner required under subdivision (1) of subsection (a) of this section constitutes a waiver of such fee.

      Monday, May 27, 2019

      Where Does an Arbitration Physically Take Place?

      Attorney Jason McGrath shares some information about where you can expect an arbitration proceeding to physically take place in this short video and summarized in this blog post.

      Understand the practical logistics of an arbitration that may arise from a dispute about your business contract.

      Here are some of the key points contained in this informational video:

      Where will the arbitration physically take place? What city or county? An attorney’s office? The courthouse? City hall?

      • As far as city or county, arbitration often takes place where a related lawsuit would be (or is) taking place.
      • Some arbitration agreements will dictate what city or county the arbitration must occur in.
      • Arbitration can usually occur anywhere that the parties agree.
      • The arbitration hearing could take place at a private law office or the arbitrator’s office.
      • Arbitration doesn't usually occur in the courthouse.

      Occasionally a court will enter an order as to the logistical specifics of arbitration, such as the hearing location.

      You should get advice from a contract attorney to assist in handling litigation issues like arbitration.

      If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio or Tennessee, we invite you to fill out our confidential client form for possible legal assistance.


      Monday, April 29, 2019

      How To Dissolve a Corporation in North Carolina?

      As an attorney who routinely handles business law related questions this situation is not unusual. Most businesses have a life cycle and it's good to know how to legally dissolve a corporation which has decided to end its operations.

      Everything must go sign in store window, going out of business, dissolving a corporation

      North Carolina has laws specific to this question. In its most basic form, the corporation needs to vote to dissolve and then file the proper documents with the North Carolina Secretary of State's office. The process is slightly different if you have issued shares or have not issued shares, and if you have a board of directors or not. There are a number of other things a corporation has to do as well. Keep in mind, also, that there are other ways and methods by which a corporation can become dissolved, such as by court order.

      A partial excerpt of the relevant section of the North Carolina General Statutes, Chapter 55 Article 14, Part 1, is pasted further below; while not exciting, it's a must-read for anyone considering corporate dissolution or already in the process of dissolving a corporation.

      The Small Business Administration has issued a guide that will also assist you in dissolving a corporation. It is not specific to a particular state, but is generally helpful. It is recommended that you procure the services of an attorney in order to assist you with this process.

      If you have a need for business law advice or services in North Carolina, South Carolina, Florida, Georgia, or Tennessee, please feel free to contact our office for assistance.

      Article 14.


      Part 1.  Voluntary Dissolution.

      § 55‑14‑01. Dissolution by incorporators or directors.

      (a)      The board of directors or, if the corporation has no directors, a majority of the incorporators of a corporation that has not issued shares may dissolve the corporation by delivering to the Secretary of State for filing articles of dissolution that set forth:

                (1)      The name of the corporation;

                (1a)    The names and addresses of its officers, if any;

                (1b)    The names and addresses of its directors, if any, or if none, the names and addresses of its incorporators;

                (2)      The date of its incorporation;

                (3)      That none of the corporation's shares has been issued;

                (4)      That no debt of the corporation remains unpaid;

                (5)      Reserved for future codification purposes; and

                (6)      That a majority of the incorporators or the board of directors authorized the dissolution.

      (b)      A corporation is dissolved upon the effective date of its articles of dissolution. (1955, c. 1371, s. 1; 1959, c. 1316, s. 261/2; 1989, c. 265, s. 1; 1989 (Reg. Sess., 1990), c. 1024, s. 12.19.)

      § 55‑14‑02.  Dissolution by board of directors and shareholders.

      (a)      A corporation's board of directors may propose dissolution for submission to the shareholders.

      (b)      The following requirements shall be met for a proposal to dissolve to be adopted:

                (1)      The board of directors shall recommend to the shareholders that the proposal to dissolve be approved unless one of the following circumstances exist, in which event the board of directors shall communicate the basis for not recommending approval of the proposal to dissolve to the shareholders at the time it submits the proposal to dissolve to the shareholders:

                          a.     The board of directors determines that, because of conflict of interest or other special circumstances, it should not make a recommendation that the shareholders approve the proposal to dissolve.

                          b.     G.S. 55‑8‑26 applies.

                (2)      The shareholders entitled to vote must approve the proposal to dissolve as provided in subsection (e).

      (c)      The board of directors may condition its submission of the proposal for dissolution on any basis.

      (d)      The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders' meeting in accordance with G.S. 55‑7‑05. The notice must also state that the purpose, or one of the purposes, of the meeting is to consider dissolving the corporation.

      (e)      Unless the articles of incorporation, a bylaw adopted by the shareholders, or the board of directors (acting pursuant to subsection (c)) require a greater vote or a vote by voting groups, the proposal to dissolve to be adopted must be approved by a majority of all the votes entitled to be cast on that proposal.  (1901, c. 2, s. 34; Rev., s. 1195; C.S., s. 1182; 1941, c. 195; G.S., s. 55‑121; 1951, c. 1005, s. 4; 1955, c. 1371, s. 1; 1989, c. 265, s. 1; 2013‑153, s. 14.)

      § 55‑14‑03. Articles of dissolution.

      (a)      At any time after dissolution is authorized pursuant to G.S. 55‑14‑02, the corporation may dissolve by delivering to the Secretary of State for filing articles of dissolution setting forth:

                (1)      The name of the corporation;

                (1a)    The names and addresses of its officers;

                (1b)    The names and addresses of its directors;

                (2)      The date dissolution was authorized;

                (3)      A statement that shareholder approval was obtained as required by this Chapter.

                (4)      Repealed by Session Laws 1991, c. 645, s. 10(c).

      (b)      A corporation is dissolved upon the effective date of its articles of dissolution.

      (c)      For purposes of this Chapter, a dissolved corporation is a corporation whose articles of dissolution have become effective and includes a successor entity to which the remaining assets of the corporation are transferred subject to its liabilities for purposes of a liquidation. (1901, c. 2, s. 34; Rev., s. 1195; C.S., s. 1182; 1941, c. 195; G.S., s. 55‑121; 1951, c. 1005, s. 4; 1955, c. 1371, s. 1; 1989, c. 265, s. 1; 1991, c. 645, s. 10(c); 2005‑268, s. 31.)


      Monday, February 4, 2019

      Follow the Contract's Arbitration Clause or File a Lawsuit?

      Attorney Jason McGrath explains some things to consider when considering whether to follow a contract's arbitration clause or file a lawsuit in this short video.

      Click here to watch on YouTube or watch the video below.

      Here are some of the key points contained in the video:
      • How do you end up in arbitration vs. in court?

      • Typically, someone has to decide - do we follow the arbitration clause or just file a lawsuit?

      • Parties usually just file a formal lawsuit as if there is no arbitration clause.

      • There can be some negatives to ignoring the arbitration clause.

      You should have your attorney take a look at the contract and then make a careful decision on how to proceed based on a through legal analysis of your case and the contract.

      If you need legal services in North Carolina, South Carolina, Georgia, Florida, Ohio, or Tennessee we invite you to fill out our confidential client form for possible legal assistance.


      Thursday, January 24, 2019

      North Carolina Mortgage Foreclosure Process - Lost Loan Notes

      In this video, focusing on the North Carolina foreclosure process, attorney Jason McGrath discusses how a lost loan note can affect a foreclosure proceeding.

      It is important to note that foreclosures can vary greatly depending on the smallest detail. An experienced real estate contract lawyer in Charlotte NC should be able to access your particular situation and guide you toward the best possible resolution.

      If you are facing a foreclosure situation in North Carolina, please fill out our confidential client intake form for legal assistance. We have staff available to assist with real estate and mortgage matters in Tennessee, North Carolina, South Carolina, Georgia, Florida, and even Ohio.