This legislation has two major components: (1) it extends the reach of the State Home Foreclosure Prevention Project, and (2) it modifies the points and fees trigger for determining that a mortgage is high-cost.
Extending the State Home Foreclosure Prevention Project (SHFPP)
Since 2008, the SHFPP has helped over 4,200 homeowners with subprime loans avoid foreclosure in North Carolina, and has allowed more than 10,000 others to meet housing counselors for free advice and assistance. Beginning November, 1, 2010, this legislation extends the program to cover all home loans whose principals do not exceed Fannie Mae's conforming loan size for a single-family dwelling.
Under this program:
- Homeowners are notified when foreclosure is imminent, at least 45 days before the foreclosure is filed
- Homeowners receive information about available resources and assistance, including:
- A hotline to access a network of 150 certified housing counselors across the state
- Legal service providers who can review loans or assist with foreclosure defense.
- Mortgage companies seeking to foreclose must file a pre-foreclosure notice with the NC Commissioner of Banks, along with a $75 filing fee. The proceeds from these filing fees will fund:
- Administrative costs, including the maintenance of the foreclosure database which will enable the tracking of foreclosures and identification of trends
- Nonprofit housing counselors and legal service providers engaged in foreclosure prevention
- The NC Housing Trust Fund (any remaining funds are to be directed here)
- The NC Commissioner of Banks is charged with monitoring the progress of loan workouts, and providing assistance when communications break down between housing counselors and mortgage companies
In addition to extending the coverage of the program beyond sub-prime loans, this bill extends the life of the program. SHFPP was set to end on November 1, 2010, but is now extended through May 31, 2013.
Modification of the Points and Fees Trigger
Effective September 1, 2010, upfront fees paid to the Federal Housing Administration, Veterans' Administration, or U.S. Department of Agriculture to insure or guarantee a home loan will not be included in the points and fees [link] calculation, to the extent that the fee exceeds 1.25% of the total loan amount. This exclusion applies only if the fee is refundable on a prorated basis upon request, and is automatically refunded upon full repayment of the loan; the fee must also be refundable upon request if the property's loan-to-value falls below 80%, and automatically refunded if it falls below 78%, in order to qualify for partial exclusion from points and fees.
In exchange for the exclusion of these fees, the points and fees threshold for a high-cost loan is lowered to 4%, from the former 5%.