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 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.