A power of sale foreclosure under North Carolina General Statutes Chapter 45 is intended to provide an efficient and expeditious alternative to a judicial foreclosure. In re Adams, 204 N.C. App. 318, 321 (2010). The authority of a lender to elect a power of sale foreclosure (sometimes referred to as a “non-judicial foreclosure”) typically arises based on an agreement between the borrower and the lender when a mortgage loan is made and is frequently evidenced by the power of sale provision in the deed of trust. Whereas a judicial foreclosure requires the filing of a civil action in district or superior court, a power of sale foreclosure is filed before the clerk of superior court. G.S. 45-21.16(a). A trustee, who is a fiduciary and a neutral party, files a notice of hearing to initiate the proceeding. G.S. 45-21.16(a), (c)(7)b. If after a hearing the clerk finds the existence of six factors, then the clerk enters an order authorizing the foreclosure sale. G.S. 45-21.16(d). The act of the clerk in finding or refusing to find the existence of the six factors is a judicial act. G.S. 45-21.16(d1).
One of the factors the clerk must find to authorize the sale is commonly referred to as the “military service” factor. Specifically, G.S. 45-21.16(d) provides that the clerk must find that the sale is “not barred by G.S. 45-21.12A” to authorize the sale. G.S. 45-21.12A is a provision under state law that provides that a power of sale foreclosure is barred during and after certain periods of military service of a mortgagor, trustor, or debtor. However, this is not the only law that provides protections for military service in power of sale foreclosures. The federal Servicemembers Civil Relief Act, 50 U.S.C. ch. 50 (SCRA), and the state North Carolina Servicemembers Civil Relief Act, G.S. Chapter 127B, Article 4 (NC SCRA), also apply to these proceedings and provide protections for certain servicemembers subject to foreclosure.
The confluence of these three laws can be a challenge to apply in practice, particularly for a proceeding intended to be “efficient and expeditious.” Adams, 204 N.C. App. at 321. As a result, in partnership with the North Carolina Administrative Office of the Courts (AOC), we prepared a new guide for clerks to assist them as they determine whether the requirements of G.S. 45-21.12A, the SCRA, and the NC SCRA have been met and therefore whether to authorize a foreclosure sale. Many thanks to my co-author, Nicole Brinkley, with the Office of General Counsel at AOC. The guide, which includes multiple flow charts, is now available for download for free here.