Gov. Mike Easley called on state lawmakers Tuesday to make up for the federal government's inaction by approving a measure to help some struggling North Carolina homeowners by giving them more latitude to repay their debt.
"We've all been looking to the federal government to step in and do something about all of these foreclosures, and they've done nothing," Easley said. "So we decided we'd do it on the state level and if nothing else, help the people of North Carolina."
Under the proposal, lenders would be required to give subprime mortgage holders at least 45 days notice before starting foreclosure proceedings. Subprime loans are typically offered to borrowers with poor credit histories.
Mortgage providers also would have to inform the state about delinquent borrowers. That notification would give the state's banking commissioner time to work with homeowners and lenders to try to hammer out a new payment plan to stave off foreclosures.
That negotiating period would keep some North Carolina residents from losing their homes, said Rep. Dan Blue, D-Wake, one of the bill's primary sponsors.
"Once something gets in full foreclosure mode, we can be pretty much assured that all of the possibilities of trying to keep this home from being sold from under these families will have been exhausted," Blue said.
The bill would also grant the state banking commissioner power to extend foreclosure proceedings by one month for those homeowners that the state believes have potential to fulfill their obligations.
Easley said the proposal may help up to 25,000 families who have "run up on a stump" while trying to make mortgage payments. Many banks support the plan because they, too, lose money on foreclosures, he said.
"This is not a bailout," said Easley, a Democrat. "This is not the state taking money to try to pay mortgages off for people. This is not the state trying to subsidize banks."
North Carolina saw almost 50,000 foreclosures in 2007 _ a 9 percent increase over the previous year, according to the governor's office.
Legislators last year tightened lending standards to protect homebuyers from adjustable rate mortgages that balloon with time by requiring mortgage providers to review homebuyers' applications more rigorously. But the 2007 law doesn't help homeowners who already took out subprime loans.
The new proposal, which was discussed in a House judiciary committee Tuesday, is designed to help homeowners who are stuck in mortgages which originated between 2005 and 2007 _ before that law went into effect. The panel ran out of time discussing the measure and didn't take a vote.
But Rep. Jim Harrell, D-Surry, questioned the plan's time restrictions. Even those homeowners who for years have been paying their mortgages on time are feeling mounting financial pressures as the cost of living has increased, he said.
"If you're going to protect people, you have to protect them all," Harrell said.
Banking Commissioner Joe Smith, who supports the plan, said the state should focus on subprime loans _ specifically, those that start with low "teaser" rates and then jump up after a few years _ which were popular during that period.
"We're not trying to police the entire mortgage market," Smith said.
The bill needs the approval of both chambers before it can be sent to Easley's desk for approval.
