For a number of years, North Carolina has had a procedure to obtain a loan payoff statement for an existing loan secured by a deed of trust (N.C.G.S. § 45-36.7). With the adoption of Session Law 2011-312, a procedure is now in place for entitled persons to request a short-pay statement. The procedure became effective on October 1, 2011.
A short-pay statement is defined as a statement identifying the amount necessary to obtain the release of all or a specific portion of the real property from the lien of the deed of trust without satisfying the secured obligation in full.
The request for a short-pay statement must include:
- The specific short-pay date which may not be more than thirty days after the notification is given;
- A clear statement as to whether the request is for the short-pay amount required to release all of the real property described in the security instrument or only a portion of that property; and
- If the request is for the short-pay amount required to release only a portion of the real property described in the security instrument, a description of the specific real property to be released upon payment of the short-pay amount.
Within ten days after the receipt of a request that complies with the requirements of the law, the secured creditor shall issue a short-pay statement. The short-pay statement from the secured creditor must contain:
- Information reasonably necessary to calculate the short-pay amount as of the requested short-pay date including the per diem interest amount, if any;
- The payment cutoff time, if any, the address or place where the payment of the short-pay amount must be made, and any limitation as to the authorized method of payment;
- Any conditions precedent that must be satisfied to obtain the release of the property; and
- Confirmation of the specific real property to be released from the lien of the security instrument upon receipt of the timely payment of the short-pay amount and satisfaction of any other conditions precedent to the release of that property.
Unless the short-pay statement expressly provides otherwise, the borrower and all others liable for payment of the obligation remain liable for the secured obligation to the extent the short-pay amount is insufficient to satisfy the secured obligation in full. Even if the short sale results in the release of all of the real property from the lien of the deed of trust, the borrower and all others obligated remain liable for any deficiency owed on the secured obligation.
A secured creditor may not qualify a short-pay amount or state that it is subject to change before the short-pay date unless the short-pay statement provides information sufficient to permit the entitled person or the person’s authorized agent to request an updated short-pay amount at no charge and to obtain that updated short-pay amount during the secured creditor’s normal business hours on the short-pay date or the immediately preceding business day.
A secured creditor is required to provide one payoff statement or one short-pay statement on request without charge within any six month period. The secured creditor may charge a fee of $25.00 for each additional payoff statement and $100.00 for each additional short-pay statement requested within the six month period.
Unless the loan documents provide otherwise a secured creditor is not required to accept a short-pay which does not satisfy the secured obligation in full. In that case, the secured creditor would respond to a short-pay request by providing a payoff statement for the full amount due and state that it will not permit the release of all or any portion of the property if the obligation is not paid in full.
Lenders should review and revise their documents for payoffs to include the requirements for requesting a short-pay statement and the issuance of the short-pay statement.
Session Law 2011-312 also addressed the question of who is authorized to obtain a payoff statement or short-pay statement. Each of the following (and agents authorized by each of the following) is considered an “entitled person” authorized to request a payoff or short-pay statement:
- A borrower. The person or entity responsible for payment or performance of the obligation;
- A landowner. The person or entity that has the right of redemption of the real property before foreclosure. This does not include a person or entity that only holds a lien on the real property or a trustee under a deed of trust (see item 7 below);
- A person or entity who has contracted to purchase the real property encumbered by the deed of trust;
- A lender that is financing the purchase of the property or refinancing an existing loan;
- A title insurance company, authorized to issue title insurance policies in North Carolina, that has insured or committed to insure the real property described in the deed of trust;
- The foreclosing trustee or the high bidder in a foreclosure sale involving the real property encumbered by the deed of trust;
- A qualified lien holder. This is a person or entity that holds or is the beneficiary of a security interest in or lien on the real property encumbered by the existing deed of trust but only if that security interest in or lien on the real property arises from the mortgage or deed of trust that is subordinate in priority to the lien of the existing deed of trust. The term qualified lien holder does not include the trustee under a deed of trust; and
- An attorney licensed to practice law in North Carolina, or a bank, savings and loan association, savings bank or credit union that is or will be responsible for disbursement of funds from the sale or refinancing of the loan secured by the real property encumbered and there is a requirement of the sale or refinancing that the property will be free and clear of the lien existing security instrument.
This amendment which expands the list of “entitled persons” should facilitate obtaining payoff statements or short-pay statements and should clarify for the secured creditor those persons who are entitled to receive this information.