1.  Mortgage Debt Collection and Servicing
 
The bill adds Article 10, Mortgage Debt Collection and Servicing Sections 45-85 through 45-90 ("MDCS") covers "servicers" as defined in Sec 2605(i) of RESPA.  But, MDCS includes third party servicers AND loan holders.  MDCS covers "home loans", which are broadly defined as loans secured by real property in North Carolina used or intended to be used as a dwelling.  A distinction of note are that the type of loan is irrelevant: it doesn't matter whether the loan is purchase money, refi, HELOC, first lien, second lien, etc.  In addition, MDCS also covers the home if it is used as a dwelling even if a second or third home.
 
MDCS restricts servicing fees:  1.  Fees charged by the servicer must be permitted under applicable law or contained in the loan documents.  (Note: As a practical matter, this section clarifies that most unilateral servicing-related fees are no longer lawful in North Carolina.)  2.  Fees incurred must be assessed within 45 days (or in the case of a foreclosure attorney or trustee fees, 45 days from when actually charged). Servicers should review their billing systems to make sure that any third party fees passed on to borrowers are processed timely, and 3.  Servicing fees must be explained "clearly and conspicuously in a statement mailed to the borrower at least 30 days after the fee has been assessed. This will require servicers to revise their programming/formatting of billing statements to comply with this requirement If these procedures are not followed, the servicer may not collect the fee(s).
 
MDCS restricts crediting of payments.  All payments to the servicer must be credited within one (1) business day, provided that the borrower has made full contractual payment and provided sufficient information regarding the account.
 
MDCS imposes new obligations on the handling of escrow accounts.  The servicer must collect and make payments for escrowed amounts (taxes and insurance) in a timely manner to ensure that no late fees are assessed or other negative results occur.  This requirement continues in a default/delinquency situation unless the borrower has been in default for more than 90 days or the servicer reasonably believes the funds advanced will not be recovered.
 
MDCS requires the servicer to swiftly respond to borrower inquiries.  The borrower is given the right to submit a "request for information" and also dispute his/her account. 

Within (10) ten days of the written request for information, the servicer must provide a statement of :  1.  Account status and balance, escrow balance, etc.; 2.  The identity of the current note holder; and 3.  Contact information for servicing representatives with authority to resolve disputes.
 
Within (25) twenty-five days of a written request, the servicer must provide a copy of the original note or an affidavit of lost note, and a full itemized payment history for a minimum of (2) two years.

2.  Foreclosure Notice Adds More Details
 
HB 1374 revises NC GS Sec. 45-21.16 to add new, detailed requirements for foreclosure notices.  In addition to the information already required by law, the foreclosure notice must contain:

A detailed written statement of principal, interest and any other fees and disbursements that the holder in good faith claims to be due as of the date of the written statement, plus a daily interest charge based on the contract rate as of the date of the the written statement.

A statement, to the best of the holder's or servicer's knowledge, whether the borrower has made any requests to the servicer for information pursuant to NC GS Sec 45-88 within (2) two years preceding the date of the written statement being provided, and if so whether those requests were complied with.  If the Holder is not the person giving this notice, the Holder must provide written confirmation of the information to the person providing the notice.

3.  Long Arm Extends to Securitization Trusts
 
Finally, HB 1374 adds NC GS 1-75-4(6)(D), which overturns NC case law and amends the long-arm statute to allow North Carolina courts to exercise personal jurisdiction over out-of-state securitization trusts by requiring any person who acquires a right to receive payment through contract or assignment under a loan made in North Carolina to a North Carolina resident is considered to have consent to jurisdiction being in the North Carolina courts for any claim under MDCS or otherwise related to the loan documents.   This section was effective immediately. 
 
Conclusion: 
MDCS poses an increased litigation risk for servicers in North Carolina.  Why you ask?  The new law creates room for technical errors in servicing procedures; differs from RESPA and could cause confusion; implements tight response timelines; could cause internal staff confusion over what constitutes a borrower's "written request."; and creates potential hazards in the handling of escrow accounts.
 
Servicers should be alert for the swift response requests-- payments, notices and requests; instruct staff regarding the differences between request that require 10-day and 25-day responses.  Implement training on these new requirements for servicing, systems and compliance personnel and update their computer systems to generate notices and comply with MDCS.

To view the bill in its entirety, please click here

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 450 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.