What Is The Foreclosure Process: A Foreclosure is a legal action that a lender can take if a person or company who borrows money using a mortgage stops making payments on the mortgage or violates any terms of the mortgage like “example” outstanding property tax or fire insurance policy that elapses etc.
HOW DOES THE FORECLOSURE PROCESS WORK IN BRITISH COLUMBIA?
Late or Missed Mortgage Payments:
If you have missed or late payments you do not automatically forfeit your home to a lender. Lenders don’t want to foreclose if they don’t have to because it is expensive and takes a lot of time. A lender will probably not start to foreclose until 2 or 3 months after you stopped paying your mortgage. Normally, a lender will first send letters demanding payment.
All circumstances come up with why you fall behind with mortgage payments. If they are reasonable problems try communicating with your lender and see if you can get on a plan to make up those missed payments over a short period of time.
The law tries to help you if you have a good chance of paying what you owe and if you try to get your finances in order. Only in the worst case may you lose your house and any equity you have built up in it.
What Happens If Your Lender Starts A Foreclosure?
“Petition for foreclosure”, this is the lender giving notice to you and asking the court to help them recover the money they lent out to you.
What should you do if you receive a petition for foreclosure?
Obtain legal advice immediately and if you want to protect yourself take part in the court proceedings. You must file:
- Response to Petition (supporting affidavits) within 21 days of getting a petition for foreclosure.
- File Response to Lender at the court address shown on petition
- Deliver 2 Copies of your Response to the lender
Once this is done, no one can take any steps in the foreclosure without notifying you. After you file the Response, you will get a document called a Notice of Hearing, which tells you when the lender will ask the judge for the order nisi to start the foreclosure.
What happens at the hearing?
- The Court will give lender order nisi (in most cases it will also give you time to redeem mortgage by paying the full amount you owe plus interest, costs & taxes.)
- Redemption Period (usually 6 months but in some cases the lender will ask the court for a shorter redemption period.) The court can make an order to sell your home at any time.
- Make a Case for a Longer Redemption Period If you need more time, you can ask for an extension. If you ask for a long redemption period or an extension, the court will want to know what you have done to pay off the mortgage and what chance you have of paying the mortgage or selling the house on your own or through your own real estate agent.
What Can You Do During The Redemption Period?
- Paying off the lender that is foreclosing on your property. This can be accomplished by contacting a mortgage broker who specializes in foreclosure loans. This may be hard, because most lenders look at your income to decide whether to give you a mortgage. And your income may be what stopped you from paying your current mortgage in the first place, which led to this situation. There are private mortgage lenders that could offer 1st or 2nd mortgages to stop foreclosures.
- You can try to sell the house, preferably using your own real estate agent. Invite several experienced real estate salespeople who do business in your area to look through your house and tell you what they think it would sell for. Be honest with them about your situation. Then choose the Realtor you trust the most or feel most comfortable with. If you sell the house, you can use the money from the sale, first to pay any property tax you owe, and then to pay the mortgage and other charges registered against the title, including court costs. If there’s any money left over (equity), you keep it. But if the money from selling your house doesn’t completely pay off all of the lenders, you may have to pay them the difference. Meanwhile, if the lender or anyone else with a charge against your house gets an offer to buy your house, they can apply to court for an order authorizing that sale.
What if you have no equity in your home? You owe more money that your house is worth.
If you owe more than you can sell the house for, you will probably want to get out of the situation with as little expense and trouble as possible. Do not ignore the problem! Working with your lender can minimize the costs by agreeing to the foreclosure. If any other people or companies with debts registered against your house are not paid from the money from selling your house in the foreclosure, you will still have to deal with them. Otherwise, they can sue you for any money you still owe them.
The lender can apply to court for an order absolute
The final order for foreclosure is called an order absolute. This comes after the redemption period ends and you have done nothing to redeem the equity in your property. The court grants order absolute and the house then belongs to the lender and you have to leave the property. You will lose all rights to the house but you will owe the lender no further money. If any debts against your house is still registered after the mortgage you’ll still owe the money to those charge holders.
If the lender gets an order absolute
In the case where the lender gets order absolute and the lender gets title into their name you can make no claim to the home. The new home owner can sell the house but you would not be responsible for any losses incurred to the new home owner.
Lenders do not usually ask the court for an order absolute. In most cases they will usually sue you when they start to foreclose and ask the court for an order to sell your house to pay off the loan. If the money from selling your home doesn’t completely pay off the mortgage loan, the lender can try to collect the difference from you.
What happens if you have a second mortgage or other charges registered against your house?
Any mortgages or charges registered before the lender’s mortgage continue and are still valid. But any that were registered after the lender’s mortgage are cancelled and the holders of those charges lose their security. For example, if you have two mortgages on your house, and the first lender forecloses, the second lender will have to pay off the first lender or lose its security. Then the second lender would have to try to get you to pay its loss.
“This information should not be relied on as legal advice, rather it is provided for informational purposes and one should always obtain legal advise when facing a legal action like foreclosure.”
If we can be of any assistance in helping with refinancing a foreclosure please call your BC Mortgage Broker Today!
Jeff Di Lorenzo
The Mortgage Group Canada Inc.