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North Carolina Bans Conflict of Interest on Deed of Trust

That is good news for homeowners in North Carolina. Other non-judicial foreclosure states such as California need to pass similar legislation.

Livinglies's Weblog

On August 30, 2017, an amendment to North Carolina’s foreclosure statutes took immediate effect.  The amended statute, Section 45-10, concerns substitute trustees under a deed of trust.  As amended, Section 45-10 now prohibits an attorney who serves as trustee or substitute trustee from representing the noteholder or the borrower while “initiating” a foreclosure proceeding.  Before the amendment, a lender often could rely on its counsel simultaneously to conduct the foreclosure and represent its interests.  With the new amendment, the takeaway for lenders is that non-judicial foreclosure under the power-of-sale provision in a deed of trust now requires two parties—a substitute trustee and lender’s counsel—and this may increase the time and expense of foreclosure.

Non-Judicial Foreclosure and Substitute Trustees

There are three parties to a deed of trust:  (1) grantor (borrower), (2) trustee, and (3) beneficiary (lender).  Typically, the first step in foreclosure is to replace, or substitute, the trustee under…

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