9 Investigates: Lawmaker wants change to legal loophole that's affecting neighborhoods

CHARLOTTE, N.C. — Since the recession hit, thousands of area homes have fallen into foreclosure and disrepair. Yards have been left overgrown; houses have been left abandoned.

But there's another unexpected kind of fallout that's causing big problems for homeowners associations across the Charlotte area.

“It's pervasive,” said Tim Sellers, a real estate attorney. “It's happening with such frequency that it’s becoming a common practice.”

Sellers, who represents hundreds of homeowners associations, is talking about chronic delays in recording deeds after a foreclosure sale.

Under North Carolina law, a foreclosure trustee is supposed to officially record the names of banks or federal agencies like HUD when they take back homes.  And it's supposed to be done right after the final report of the foreclosure.

Too often, that's not happening.

A house in the Waterlyn neighborhood in south Charlotte was sold in foreclosure in April 2010. But when Eyewitness News searched county records with Register of Deeds David Granberry, we found the deed wasn’t recorded until August 2012, more than two years after the foreclosure sale was final.

At a house in north Mecklenburg County, it's even worse. The foreclosure sale was final in August 2010, but a new deed still hasn't been recorded.

“We're talking months and years in some cases,” Sellers said. “It's ridiculous.”

"And HOAs are getting caught in the middle?” Eyewitness News asked.

“Absolutely in the middle,” he said.

When Eyewitness News began our investigation six months ago, we talked with Jeannie Welch with the Becton Park HOA.

“Together it's over $16,000,” she said.

It took Welch's Becton Park neighborhood two years to collect that much in unpaid HOA fees related to foreclosures, which delayed projects like new roofs and fences.

“Is there a big impact for communities?” Eyewitness News asked.

“Yes, I would say so, especially for us -- a moderate-income community,” Welch said. “We have to set our budget based on the theory that everyone will pay their dues.”

In Union County, Alex Ortiz, a Meriweather Community HOA member, faces a similar problem.  This summer, foreclosures left a number of homes overgrown but no one accepting responsibility.

“We're trying to bring the owner to a hearing and we're being told, 'Well, the house, it's bank-owned and the bank hasn't recorded the deed so we can't do anything about it,’” Ortiz said.

“Is that frustrating?” Eyewitness News asked.

“Very,” Ortiz said.

Despite that frustration, there's nothing illegal at all about what's happening because North Carolina has no requirement that deeds be recorded within any specific amount of time.

But because of Eyewitness News’ investigation, that could change. After we told state Sen. Malcolm Graham about the legal loophole we've found, he's ready to propose a new law to close it.

“I believe new legislation is needed that would require that the new owner within 30-60 days complete the loop on this transaction,” Graham said.

Graham said he'll introduce that legislation in January.  Until then, neighborhoods across Charlotte have few options.

“What can we do?” Welch said. “We're sort of in limbo.”

Eyewitness News contacted both HUD and Bank of America for this story. Both deny that they're intentionally delaying the process of recording deeds on foreclosed properties.

Graham said he still plans to pursue new legislation to deal with the issue.

WSOC