A foreclosure can be stressful, so understanding what a that is, and what to expect is vital to making the process easier. Nobody wants to lose the roof from over their head. Foreclosure is a complicated process in Canada, but there are ways to prevent it and to get help with the process.
No matter if you are a borrower or a lender, knowing the ins and outs of the whole mortgage foreclosure is beneficial.
What does a foreclosure in Alberta mean?
Foreclosure is a process that is initialized when a borrower falls behind in their payments. It is the legal procedure for a lender to recover mortgage payments that are in arrears. The process, in Calgary, Alberta, is administrated by the “Law of Property Act.” The most common practice is for a lending company or bank to submit a file to a specialized lawyer after 2 or 3 months of missed payments. The lawyer will then deliver a “Demand Letter” to the person who borrowed the money. A “Demand Letter” is a way of notifying the borrower that there are debts to be settled. The letter gives a set number of days for these debts to be paid. If the problem is solved and all is paid off in full, including legal costs, then, everything goes back to normal.
However, if the borrower is unable to settle their debt before the set date, due to financial hardship, for example, a “Statement of Claim” is opened by the lawyer. That is the beginning of a foreclosure process. It commences a lawsuit by what is called the “Plaintiff” (the lender) against the “Defendant,” which is the borrower.
Help with a Statement of Claim in Alberta
The purpose of a “Statement of Claim” is to lay out what breach in the contract has been done against the terms of the borrower’s mortgage contract. It will also provide the desired solution from the lender. Alberta law allows 20 days for the borrower to reply and file a “Statement of Defense.” However, more options are available, each with their benefits and drawbacks.
- Take no action
- Quit the claim
- Demand of notice
- Statement of defence
- Consent order for foreclosure
The whole amount can be paid off in full. However, the legal costs will have incremented. The best way to understand your options if to find a housing counsellor, who can asses which is the best option to take.
Understanding your foreclosure options
To best assess the situation and choose which is the best course of action to take, people need to know what each action involves. Reading this list will help understand each action.
Taking no action: If you ignore the “Statement of Claim,” you will be making a big mistake. Ignoring the claim gives the lender permission to issue a “Noted in Default.” This means that the mortgage lender can take legal actions without informing the borrower of what steps were taken. The claim can be resolved in just a matter of days, and the borrower can be left without a property.
Quitting the claim: Taking this action means, the borrower is handing over the title of their house to the lender. For the Courts to approve this, a borrower will need a “Certificate of Independent Legal Advice” and hire a lawyer. The person in debt will be asked to release all equity and move out of the property.
Filing for “Demand of Notice”: This is for those in financial hardship or who bought a fixer-up that holds no equity or value. It will result in a higher cost for the borrower, but the lender’s lawyer must inform them of every stage the foreclosure process goes through. This gives the borrower the chance to ensure that the application and process were done correctly and to contest any issues that may arise in court.
Filing a “Statement of Defense”: This involves informing the lender that the borrower plans to defend the lawsuit. The borrower needs to list the reasons why the lender is wrong to be filing for foreclosure. The borrower needs to be very secure of the lenders being wrong to take this step, as it increases the cost and the judgment against the borrower.
Negotiating a “Consent Order for Foreclosure”: If there is value or equity in the property, but the borrower is struggling to pay the mortgage payments, they can negotiate a longer period of foreclosure. They will need a “Certificate of Independent Legal Advice” for this to be approved by the Courts. It allows the borrower to live longer in their home, before being vacated. It also means there is an option to sell the property privately, instead of waiting while the court sells your home in an auction.
Every borrower has the right to file a “Redemption Period.” For urban lands, the period is commonly six months from the date when the order was granted. Once this period is over, the Courts will decide how to dispose of the property, via a sale or other means.
No matter which action the borrower takes, or the outcome, unless they win a “Statement of Defense,” it is the borrower who pays the legal costs. This is regardless of being able to pay the mortgage arrears or not.
One drawback of a foreclosure process in Alberta
In Canada, going through a foreclosure process doesn’t mean the borrower cannot get a second mortgage. However, it has the possibility of delaying and complicating the process. Mortgage lenders recommend the borrower waits two full years after a foreclosure before applying for a mortgage again. Unless they can provide evidence that the foreclosure was because of mitigating circumstances. Or can pay a down payment of 25% or above. The two years waiting gives the lenders confidence if the borrower can provide evidence of a stable job and regularly pays bills.
Foreclosure prevention in Calgary, Alberta
If you are in the unfortunate situation of having received a “Demand Letter” and you need help, you must contact Bridgedale Home Buyers. They can help with foreclosure prevention, loan modifications and other ways of foreclosure alternatives. If you want a short sale from a HUD-approved home buyer, this is your best option.