Foreclosure can easily be one of the most stressful and complicated processes, especially in Canada. After all, the last thing a person wants is losing the roof above their head. No matter whether you are a borrower or a lender, knowing the best ways to prevent or mitigate it, when and where to look for professional help, and the other ins and outs is crucial.
Now, let’s start from the fundamentals and build upon them.
What Does a Foreclosure in Alberta Mean?
As Bankrate.com states, foreclosure is essentially when a lender (most commonly a bank) takes control of a property from the owner that owes the money or falls behind in their payments. In this case, every province has a legal procedure for the bank or a lending company to recover mortgage payments.
In Calgary, Alberta, the legal process is administered by the “Law of Property Act.” The common, almost standard way to start it is by calling a lawyer who specializes in the field and submit the file after a couple of months of missed payments. The lawyer will write a “Demand Letter.” Then it will be sent to the person owing money to notify the borrower that the situation can be resolved easily if all the money owed and legal costs can be paid off in full until a set date. Once the money is paid, and the problem is solved, no further actions are required from either side of the argument.
Unfortunately, often things don’t go this smoothly. What can be done if the borrower doesn’t have sufficient funds to settle their debt on good terms? In this case, the lawyer can open a “Statement of Claim,” a lawsuit commenced between the lender (“Plaintiff”) and the borrower (“Defendant”). That’s the official beginning of a foreclosure process.
Help with a Statement of Claim in Alberta
To help you understand the mortgage foreclosure process better, let’s look at the above-mentioned “Statement of Claim” more in-depth. Essentially, it lays out how one side of the agreement (in this case, a borrower) breached the terms of the mortgage contract and indicates the desired solution from the lender. Alberta law states that the borrower has 20 days to file a “Statement of Defense.” However, there are more foreclosure options available out there, with their own pros and cons.
Let’s look at possible mortgage foreclosure options:
1. Taking No Action
Ignoring the “Statement of Claim” is one of the worst things a borrower can do. If there is nothing to say, the lender can simply issue a “Noted in Default” statement, so legal actions can be taken without even notifying the person that owes the money. As a result, there is a chance the borrower may be left without property at all in a matter of a few days. To sum up, don’t ever ignore the “Statement of Claim.”
2. Quitting The Claim
If the debt can’t be paid in any way possible, quitting the claim and handing over the house to the lender is another route a borrower can take. In this case, the person will need to hire a lawyer and get a “Certificate of Independent Legal Advice.” If that’s done, the court will likely rule for the person in debt to release the equity and move out of the property.
3. Filing for “Demand of Notice”
The letter is usually sent to the lender. It demands to notify the borrower of every stage of the mortgage foreclosure process, so the person that owes money can make sure that both the application and the process were done properly and to mitigate any issues that may arise in court later.
4. Filing a “Statement of Defence”
This essentially means letting the lender know that the person owing money plans on defending the lawsuit. The borrower lists the reasons why the filing for foreclosure was unreasonable and states that the lender was wrong. The only thing to keep in mind is that the reasons must be legitimate. If not, the cost and the judgement against the borrower will increase.
5. Negotiating a “Consent Order for Foreclosure”
If the borrower is having a hard time to pay the mortgage but has equity in the property, a longer period of foreclosure can be negotiated. The person owing money will need the “Certificate of Independent Legal Advice” for the court to consider the claim and to increase the likelihood of the approval. With more time on hands, the person will have an opportunity to sell the property privately for a better price, instead of waiting until the court sells the house in an auction.
On an important note, “Redemption Period” can also be filed for. That’s the right of every borrower, and the period can often be 6 months from the order grant date. Once the time is up, it’s up to the court to rule out how the property is to be managed.
Another crucial point to remember is that the costs and fees will vary depending on the action the borrower takes, but the legal costs still have to be paid by the person that owes money, no matter if they are able to afford the mortgage payments or not. That’s unless they win the “Statement of Defence,” of course.
The drawback of a Mortgage Foreclosure Process in Calgary, Alberta
In Canada, the mortgage foreclosure process isn’t the end of the world, because that doesn’t mean that the person can’t get a second mortgage after some time. Clearly, having this on a record can make the process of getting it a little more complicated, but at least it’s not out of the question.
Banks and other mortgage lenders suggest waiting for at least 2 years after a foreclosure before attempting to get another mortgage. If the borrower is able to provide evidence of having a stable job and paying bills on time for a period of 24 months or more, the lender will likely have enough confidence in your ability to make the payments regularly. Another way to mitigate it is by paying 25% or more, which also does a great job in increasing your chances of getting a new mortgage.
Foreclosure Prevention in Calgary, Alberta
If you happened to find yourself in the situation of getting a “Demand Letter,” you can always contact our team of professionals, and we’ll assist you with everything from foreclosure prevention to loan modifications, and other various foreclosure alternatives. Also, if you are looking for a short sale from a HUD-approved homebuyer, we are here to help you.
How To Stop Foreclosure
Foreclosure can be truly stressful and anxiety-ridder times in a person’s life. After all, losing one’s home is as scary as it gets. If you happen to find yourself in a situation where your home is close to the jeopardy of foreclosure, don’t give up, there are some options out there that may be available to you.
1. Negotiate With Your Lender
If you found yourself in a situation where you are behind on mortgage payments, and believe that your lender can try to foreclose on your house, try negotiating a new payment plan. This may come off as a surprise to some borrowers, but many lenders are actually willing to negotiate instead of foreclosure on the property. They would much rather keep getting your mortgage payments, while you get to keep your home. Of course, that’s only as long as you “play by the rules” and continue making mortgage payments regularly.
There are 2 plans that lenders usually offer the borrowers who are falling behind on payments – repayment and modification.
Repayment is the first option, and the more straightforward one, that’s why it’s discussed first. Essentially, the homeowner keeps paying back the money he owes as he goes. That means that on top of the regular monthly payments, the lender may ask the homeowner to pay a little extra every month. For example, if you pay $1500 a month and have missed the last two month, the lender may ask you to pay $2000 a month for 6 months or $1700 over a period of 15 months. Once again, everything depends on the lender and your financial situation.
Modification is a more complicated way to prevent foreclosure but is also a popular one. The plan usually involves a significant change in the homeowner’s lifestyle, with either means that his income went down or his mandatory expenses have gone up. In this case, the regular mortgage payments will be lowered, which means the borrower will have to pay the lender for a longer period of time. The modification plan is also offered if the house owner isn’t yet behind on payments, but expects fluctuation in his income in the nearest future.
The sooner you speak to your lender, the more options you’ll end up having, so don’t postpone it until the last moment. It’s rarely a pleasant experience, but it will save you a lot of hassle in the future.
2. Reinstate Your Loan
“Reinstating” your loan to bring it back to the current status is another way of mitigating the foreclosure process. To put it shortly, this requires paying the entire amount, adding any fees that the person lending money had to incur as a result of homeowner’s delinquency. As an option, the borrower may also “redeem” the loan by paying it off in full. Clearly, this only works if he can refinance the loan.
3. Forbearance Plan
If you forbear on your loans, the lender will suspend all mortgage and other payments for a certain amount of time, typically a 3 to 6 months period. Once it’s over, the homeowner is expected to may everything he owes that includes all full payments and any deficiency. This is an option if the borrower is facing a big unexpected yet mandatory spending or just lose his job. Over the period of forbearance, the homeowner is expected to get financial affairs in order and resume regularly paying as per the original agreement.
4. Sell Your Property
If none of the above steps worked, selling your property can be your last resort to stop foreclosure. Sometimes a homeowner can’t catch up on payments, or the lender doesn’t want to cooperate and won’t agree to a modification plan – things happen. Even though you won’t be able to keep your house, selling the property will save your credit score, or at least won’t hurt it nearly as much as a foreclosure will.
Why Bankruptcy Doesn’t Stop Foreclosures In Canada
A simple Google search may advise filing for bankruptcy when facing foreclosure (coming from the most reputable sources on the web). However, note that this will not stop nor remedy the foreclosure, because personal bankruptcy in Canada does not involve secured debts (mortgages included), unlike a credit card or consumer debts, which are categorized as unsecured. This may work in some countries, like the US, but doesn’t apply to Canadian regulations. In order to avoid such issues, make sure to make your search as specific as possible.
If you are having trouble with mortgage payments or facing foreclosure, please contact us as soon as possible. Our team of professionals will assist you immediately! You can stop the foreclosure process in Alberta by calling our office at 403-280-3300.
Here are a few more articles that could be useful if you’re facing foreclosure
Can you stop a foreclosure in Calgary?
Many people ask us: “Can you stop foreclosure in Calgary?” The answer is definitely, “Yes.” Let’s get into some details to understand the nature of foreclosure better and review your options.
Can I still sell my house in foreclosure?
The answer is, definitely! Selling a judicial foreclosed property can be a heartbreaking journey for homeowners. It is indeed possible to go ahead and sell the property before it gets seized by the bank.
Ways to Stop Foreclosure in Calgary, Alberta
What to do when facing foreclosure or how to stop pre foreclosure from a mortgage company? Foreclosure notice received, is it the end of the road? Are you facing foreclosure? We can help!
Get House Out of Foreclosure
Foreclosure is a way for lenders (the bank or another institution) to make you pay up your mortgage. There is no doubt that you know what happens when you get a foreclosure notice, but is it possible to get a house out of foreclosure? Let’s review the options…