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.