North Carolina Governor Eliminates Subprime YSPs

Among 16 bills signed by North Carolina Gov. Mike Easley over the weekend were three bills meant to stem the tide of foreclosures in the state through a number of means, including the elimination of yield-spread premiums paid on subprime mortgages.


With 10,511 foreclosure filings in the second quarter, North Carolina had the 26th highest foreclosure rate in the country.

There was one filing for every 383 households in North Carolina, representing an increase of 2.2% from the prior quarter and 58% from a year earlier.

Gov. Easley signed three bills on Monday that he expects to help with the reduction of home foreclosure filings due to the crisis in the subprime mortgage market during the next few years.

One bill signed institutes the North Carolina Foreclosure Prevention Project requiring that homeowners and the State Banking Commission be notified at least 45 days prior to a foreclosure filing.

It also allows the bank commissioner to extend any foreclosure filing notice up to 30 days which would give the state a longer period of time to negotiate with the mortgage lender and the homeowner on the loan’s interest rate and payment schedule.

Easly states that the law may assist over 25,000 families to afford their mortgages and keep their homes.

“The program is the first of its kind in the nation that makes sure homeowners and lenders avoid foreclosures, where everyone ends up a loser,” Easley said.

“Our goal is to help bring borrowers and lenders together so that the family gets to keep their home and the bank does not lose money on the loan.”

According to Easley, when banks foreclose, they lose about 40 percent on the loan.

Another bill eliminates rate spread premiums, or yield spread premiums, which go to mortgage brokers.

Certain reviews of these payments claim they give brokers motivation to charge higher fees without having any benefit to the consumer, while others claim it is a justifiable way for borrowers to extend mortgage broker fees over the life of the loan.

The third bill Easley signed into law requires individuals and companies serving loans in North Carolina to register and make reports to the State Bank Commissioner.

Posted 8/21/2008 @ 3:10 PM | Mortgage