Dealing with FC Squatters, Assumed Names, & Manufactured Home Liens

The North Carolina General Assembly ended its 2016 legislative session in July and placed some new laws on the statute books that of which servicers and companies that manage REO assets should be aware.

Foreclosure Squatters

State law already provided for the punishment of persons who, without authorization, enter or remain on property belonging to another or where the property is “so enclosed or secured as to demonstrate clearly an intent to keep out intruders.”  N.C.G.S. § 14-159.12(a).  In a move expressly designed to deal with squatting in foreclosed property, that section has been broadened, effective December 1, 2016, making it a Class 1 felony for a breach of this subsection if, either, the trespasser re-enters real property after having already been lawfully removed, or, the trespasser has “has knowingly created or provided materially false evidence of an ownership or possessory interest."  § 14-159.12(f).  

This amendment will allow the owner of an REO asset to seek the assistance of law enforcement to take prompt and more direct action against former borrowers or rental scammers who seek to either frustrate the lawful actions of servicers or investors that manage REO assets, or who seek to make a quick profit by posing as the owner of the property.

 

Assumed Business Names

All persons, including corporations that do business in North Carolina using an assumed name, must be mindful of amendments to the assumed name statute that took effect on July 1, 2016.  The new statute, the “Assumed Business Name Act”, will completely replace the previous version by July 1, 2022.

As it applies to lenders and servicers, the new use of any assumed business name in the State now requires the registration of that name with the register of deeds in the county in which the entity will engage in business.  An “assumed business name” means any name other than that stated in the company’s articles of incorporation or organization on file with the Secretary of State.  If the entity intends to engage in business in more than one county, only the one registration is required.  Registration is required for each assumed business name in which the entity conducts business in the State.  The Act details the required content and manner of execution of the certificate and provides for necessary amendments and the withdrawal of the assumed name.  

A State agency may create a form for use by registrants, but using the form is not mandatory.  No such form has yet been created, and registrants may create their own forms.

Noncompliance with the Act exposes the violator to pay to any person injured by the failure to register the assumed business name his “reasonable expenses, including attorneys’ fees, incurred by the person in ascertaining, for a reasonable purpose, the information required to be stated in the… certificate….”

The Act applies to any new “assumed business names” a person or corporation may use in doing business in North Carolina after July 1, 2016.  For assumed names already registered under the previous law, those remain valid until the old assumed name law expires on July 1, 2022.  After that date assumed names registered under the previous law must be re-registered as assumed business names under the new law.  The ability to file an assumed name under the old law expires after June 30, 2017, so until then both the old and new methods for registration are in effect.  

 Manufactured Home Liens

Amendments to the law governing manufactured homes address the issues of lien renewal, cancellation, and release, among other changes.  Of most interest, unless the certificate of title is unavailable, a new application for the notation of a security interest on a certificate of title for a manufactured home must state the lien’s maturity date.  The DMV must mark the maturity date on the certificate.  In such a case, the perfection of the security interest automatically expires, if not renewed, on the earlier of:  (i) 90 days after the maturity date stated on the application for a security interest, (ii) 15 years plus 180 days after the original maturity date if not extended, or (iii) 90 days after any extended maturity date stated on the application for renewal.  

 If renewed, the perfection of the security interest automatically expires on the earlier of  (i) 10 years after the date of renewal, (ii) 90 days after the original maturity date if not extended, or (iii) 90 days after any extended maturity date stated on the application for renewal.

With respect to a security interest that is not perfected pursuant to § 20-58(c) (i.e., the application does not state the maturity date) the perfection automatically expires 30 years after the date of issuance of the original certificate of title, unless a different maturity date is stated on the title.

Prior to the date that perfection of the security interest automatically expires, as stated above, the secured party may apply to renew it provided the application contains, among other material, the written agreement of the borrower extending the maturity date. 

Amending and supplementing the procedures for lien release found in § 20-58.4, the new law adds a section specifically dealing with the release of a manufactured home lien, providing that the owner may proceed with securing a release in accordance with existing subsection (e), or may proceed under new subsection (e1).  Under subsection (e), if it is impossible for the owner to secure a release from the secured party he may provide the DMV with evidence the debt was satisfied.  Under subsection (e1), the owner may provide a sworn affidavit that the debt was satisfied and that either (i) after diligent inquiry he cannot determine the identity or location of the secured creditor or successor in interest; or, (ii) the secured creditor has not responded within 30 days to the owner’s written request to release the lien.  If the DMV is satisfied as to the legitimacy of the proof provided by the owner under either subsection (e)  or (e1) it must give the secured creditor at least 15 days’ notice to the last address known to the DMV by registered mail.  The DMV must not cancel the security interest if the secured party informs it within the 15 day period that the security interest remains in effect.

It will be important for servicers of manufactured home loans secured by the possession of a certificate of title or by the notation of a lien upon a certificate of title to be watchful for communications from the owner of a secured manufactured home in North Carolina, or from the North Carolina Department of Motor Vehicles, with respect to the satisfaction of the debt secured by the manufactured home or the release of the manufactured home security interest.

These amendments take effect on July 1, 2017.

Published by Hutchens Law Firm on September 27, 2016