The foreclosure process is how lenders like banks try to obtain money that is owed on mortgages and should have been paid earlier. The failure to make timely mortgage payments, failure to pay homeowner taxes, failure to obtain home insurance coverage and failure to prevent excessive property damage could lead to foreclosure proceedings. It is also important to note that during a foreclosure process, the lender will usually have a clause stating that the borrower would have to bear the burden of paying for the lender’s legal costs.
- First Notice of missed payment
The foreclosure process usually starts when the lender sends the borrower a letter or a call after a payment is missed. An option that the borrowers have at this point is ask the lender for a delayed payment. The borrowers may be interested in this option as well as it allows them to avoid court procedure. However, going for this option will be harder if there have already been multiple instances where payment was delayed.
- Demand Letter and (3) Statement of Claim
If the borrower does not respond to the above letter or call, a demand letter, which is a more formal letter typically drafted and signed by a lawyer, may be sent on behalf of the lender. The demand letter usually has a deadline to respond or pay within a certain deadline, and if this deadline is not met, a Statement of Claim for Foreclosure will be filed. This Statement of Claim for Foreclosure will then be served on the borrower. The borrower will have a certain amount of time to respond to the Statement of Claim.
- File Statement of Defence. Obtain his or her own appraiser to fight the appraised value of the lender.
The borrower then has the following options in responding to the Lender’s Statement of Claim. The borrower can respond and file their own Statement of Defence if the foreclosure documents filed by the lender contain inaccuracies, such as if there is a discrepancy between the amounts loaned and the amounts paid.
- Pay the amounts in arrears. Ask for a longer redemption period and use this period wisely to either refinance or sell the property at your own terms.
The Borrower may also repay the missed payments during the redemption period. The redemption period usually lasts between 1 day to 6 months, which depends on how much equity is on the property. The higher amount of equity that a borrower has on a property, the longer redemption period the borrower is entitled to. The borrower can also use this period of time to refinance or sell the house at their own terms.
Other options for the Borrower are (3) filing a Demand of Notice, so that they will be notified of any developments regarding the foreclosure proceedings while they attempt to make up the missed payments or sell the home themselves, (4) Quit Claim, where the borrower agrees to hand the title of the property to the lender, (5) Consent to the foreclosure, or (6) do nothing. Consenting to the foreclosure may allow borrowers to stay in the house for some amount of time and negotiate specific terms with the lenders. It is highly recommended to take action and make use of the redemption period to take steps such as getting your own appraiser to determine the value of the property, or attempt to refinance or sell the home. Doing so would allow the borrower to continue to set the sale price of the house. If the borrower does not use their time wisely, an Order for Judicial Sale or an Order for Foreclosure may be granted, which is basically the courts deciding the specifics regarding the property.
Consequences of Foreclosure
There are various possible consequences in a foreclosure process. It may take some time for borrowers who have been foreclosed to obtain a new mortgage. Lenders usually look for years between the time a borrower goes into foreclosure and the time they are offered with a new mortgage. Furthermore, lenders can also go for a deficiency judgment if your mortgage is high-ratio mortgage, which is basically if the value of the property goes down below the mortgaged amounts, the lender can try to claim for the difference.
Rafael completed his Juris Doctor from the University of Calgary, where he also graduated with a Bachelor of Arts in Political Science. During law school, Rafael volunteered with Pro Bono Students Canada as a Project Coordinator for the Immigration Project, and with Student Legal Assistance as a student caseworker, providing legal services to diverse clients.
Rafael is an active member in the Filipino Calgarian community and can provide services in Tagalog (Filipino) and English.