NC Modernizes State SAFE Act and Changes Maximum Lender Fees for Junior Lien Loans

The North Carolina legislature enacted substantial changes to the state’s Secure and Fair Enforcement Mortgage Licensing Act (NC SAFE Act).  Some of the notable changes, taking effect on October 1, 2025, include the following:

• Creates new prudential standards for mortgage servicers with servicing portfolios of 2,000 or more residential mortgage loans serviced or subserviced, excluding whole loans owned and loans being interim serviced before sale. These “covered institutions” will need to meet capital and liquidity requirements, and corporate governance requirements, which include having a board of directors (or similar structure), internal and external audits, and a risk management program and assessment;
• Expands the definition of “engaging in the mortgage business” to, among other things, include servicing reverse mortgages, finalizing collection through the North Carolina foreclosure, forfeiture, or repossession laws, and collecting fees due to the mortgage lender or servicer, when any of the foregoing is done for compensation or gain under the terms of a loan or contract;
• Amends the definition of “residential mortgage loans” to include reverse mortgage loans and contracts for deed;
• Requires registration to engage in mortgage origination support activities;
• Adds additional types of entities who are exempt from the NC SAFE Act and changes the exemption cap for seller financers from 5 or fewer residential mortgage loans to 3 or fewer;
• Requires applicants for a license or registration to have a principal office in the US, and requires branch offices to be in the US; and
• Requires mortgage lenders and brokers to include a link to NMLS Consumer Access on their websites.

This law also changes the cap on permissible lender fees or discounts for certain junior lien loans. For loans with a principal amount under $300,000, the current 2% limitation on lender fees and discounts will not apply to a loan secured by a junior lien if the total points and fees charged by all lenders related to that loan do not exceed the lesser of:

• The applicable points and fees threshold for Qualified Mortgages in Regulation Z; or
• 3% of the total loan amount.

This provision relating to permissible lender fees will apply to loans made on or after the legal effective date (different from the NC SAFE Act effective date), which will be sometime in January 2026.