What steps can I take if my mortgage servicer violates federal regulations on loss mitigation and loan assumption? – North Carolina

Short Answer

In North Carolina, if a servicer recognizes you as a confirmed successor in interest but refuses loan assumption or loss mitigation, send a formal Notice of Error and Request for Information to the servicer’s designated address and apply for loss mitigation in writing. Federal rules require prompt acknowledgment and a timely, good‑faith review, and they restrict foreclosure movement while a complete application is pending. If foreclosure is threatened, you can ask the Superior Court to pause the sale and enforce your rights.

Understanding the Problem

In North Carolina, can you—now on title after a divorce and already confirmed by the servicer as a successor in interest—force the servicer to evaluate you for an assumption or loss mitigation when they refuse to do so? This question sits at the intersection of federal mortgage‑servicing rules and North Carolina’s foreclosure process before the Clerk of Superior Court.

Apply the Law

Federal servicing rules require servicers to treat a confirmed successor in interest as a borrower for key protections, including access to information, error resolution, and loss mitigation review. A complete loss mitigation application submitted far enough before a scheduled sale triggers timelines and pauses dual‑tracking. In North Carolina, power‑of‑sale foreclosures are heard by the Clerk of Superior Court, but broader servicing violations are typically enforced through written notices to the servicer and, if needed, a separate court action in Superior Court seeking to stop a sale.

Key Requirements

• Confirm successor status: Provide documents (e.g., divorce judgment and deed) so the servicer treats you as a borrower for servicing rights.
• Send a Notice of Error/Request for Information: Mail it to the servicer’s designated address; they must acknowledge quickly and investigate/respond within set timelines.
• Submit a complete loss mitigation application: Do it in writing; if complete and received early enough (generally more than 37 days before any sale), review and appeal timelines apply and dual‑tracking is restricted.
• Seek court protection if a sale is pending: File in Superior Court to enjoin the foreclosure if the servicer’s violations are material and ongoing.
• Use the correct forum for foreclosure issues: The Clerk of Superior Court handles the limited foreclosure hearing; broader equitable or federal‑law issues are typically addressed in Superior Court.

What the Statutes Say

• 12 C.F.R. § 1024.30(d) (Successors in interest) – Once confirmed, successors receive borrower‑level servicing protections.
• 12 C.F.R. § 1024.41 (Loss mitigation procedures) – Sets review, appeal, and dual‑tracking limits tied to application timing.
• N.C. Gen. Stat. § 45-21.16 (Power‑of‑sale foreclosure hearing) – Clerk’s limited hearing on the creditor’s right to foreclose.
• N.C. Gen. Stat. § 45-21.34 (Injunctions to enjoin foreclosure) – Allows Superior Court to stay a sale for equitable reasons.

Analysis

Apply the Rule to the Facts: You already hold title from your divorce and the servicer has confirmed you as a successor in interest. That confirmation means you can demand information, send a Notice of Error about refusal to review, and submit a complete loss mitigation application. If the application is complete and timely, federal rules require review and limit foreclosure movement. If a sale is scheduled, you can seek an injunction in Superior Court to pause the sale while the servicing violations are addressed.

Process & Timing

1. Who files: Homeowner/successor in interest. Where: Send a written Notice of Error and Request for Information to the servicer’s designated address; file any court action in the appropriate North Carolina Superior Court; any foreclosure hearing occurs before the Clerk of Superior Court. What: Notice of Error/Request for Information under federal servicing rules; complete loss mitigation application; complaint and motion for temporary restraining order/preliminary injunction. When: Servicer must acknowledge your Notice within about 5 business days and generally respond within about 30 days; submit a complete loss mitigation application more than 37 days before any scheduled sale to trigger key protections.
2. Monitor the servicer’s response and keep proof of mailing. If denied loss mitigation, review the denial letter for any appeal window tied to federal timelines and submit a focused, timely appeal with supporting documents.
3. If foreclosure is noticed or scheduled and violations persist, file in Superior Court under § 45‑21.34 seeking to enjoin the sale and enforce servicing rights. The expected outcome is a court order addressing whether the sale proceeds and what corrective steps the servicer must take.

Exceptions & Pitfalls

• Failure to use the servicer’s designated address for Notices of Error/Requests for Information can void response deadlines—use the address listed in your monthly statement or on the servicer’s website.
• If your application is incomplete, key protections may not apply; respond quickly to the servicer’s document requests so your file becomes complete.
• The Clerk of Superior Court cannot order mediation in Chapter 45 foreclosures; do not rely on a clerk‑ordered mediation pause to fix servicing problems.
• At the foreclosure hearing, the Clerk’s authority is limited; raise broader servicing violations by separate action in Superior Court and request an injunction before the sale.
• Deadlines and procedures can vary; keep copies, mail by trackable delivery, and calendar all response and appeal dates.

Talk to a Real Estate Attorney

If you’re dealing with a servicer refusing assumption or loss mitigation after you became a confirmed successor in interest, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.