Foreclosure law is changing quickly in Alberta. Now more than ever, it is very important to have up to date information on your rights and options. Technically speaking, a homeowner is “in default” once they fail to pay a mortgage payment at the scheduled time. While the lender is entitled to start foreclosure proceedings right away, it is more likely to occur after a series of missed payments.
If you have defaulted on your mortgage, one option to avoid potential foreclosure is to provide the lender with a payment plan outlining the dates and amounts you commit to pay in order to get the payments back on track. The earlier this happens in the process the better, as it keeps legal costs down, and demonstrates to the lender your ability to repay your debt.
Home foreclosures in Canada are a rather involved and somewhat complex process. It is through foreclosure action that lenders attempt to recoup arrears and principal balances on mortgages in default. Some of the most common causes of lenders initiating foreclosures include:
- Failure to make timely mortgage payments.
- Failing to pay homeowner taxes.
- Not carrying required home insurance coverage.
- Failure to pay HOA dues or fines.
- Permitting excessive property damage without making repairs.
The home foreclosure process in Alberta is called a Judicial Sale, and here is what homeowners can expect to occur throughout the procedure.
Steps in Alberta’s Foreclosure Process
Before delving into judicial sale foreclosure steps, it’s important for homeowners facing this situation to understand the potential financial repercussions beyond the mortgage debt. The cold hard truth is that the costs of legal type of action taken and individuals hired to handle the foreclosure process are generally passed on to the owners. Essentially, lenders and even insurers can pursue a deficiency judgment after the foreclosure is over in an attempt to recover any remaining mortgage balances in addition to other fees incurred. Now, let’s cover those judicial foreclosure steps in Alberta.
1. Initial Contact From Lender
A lender will generally send owners a letter or call after one payment is missed. While most don’t begin foreclosure after a single missed payment, they do have legal rights to do so. However, most want to work with owners and may allow for a delayed payment (for a fee) to forego the time consuming foreclosure process.
2. Demand Letter
Owners who don’t respond to the initial contact effort on behalf of the lender will often receive a demand letter after the second missed payment. This letter will demand that arrears must be paid immediately to prevent foreclosure and may come from an attorney, the lender or a collection agency.
3. Statement of Foreclosure Claim
Once a lender has begun the foreclosure process in Alberta, owners receive a statement of claim that is filed with the Court of Queen’s Bench. This lets the party know that action has been taken by the lender to secure the title and reclaim the home. Because lawyers handle this paperwork, the borrower is likely to be held liable for additional costs from here on out during a foreclosure.
Potential Actions for Borrowers Facing Foreclosure
Once a statement of claim has been filed, borrowers will have a number of options they can pursue—some with greater benefits and repercussions than others.
1. Take No Action
While this is not typically advised, many borrowers take no action and ignore foreclosure warnings from lawyers and lenders. After the grace period in the notice to take action has passed, lenders can skip ahead to the final stages of foreclosure.
2. Repay Arrears During Redemption Periods
Until a final decree of foreclosure is declared by the courts, Alberta borrowers maintain a right to redemption, known as a foreclosure redemption period. As it’s name implies, this negotiated period usually spans from three to six months and is time that the courts allow for the debtor to ‘redeem’ the mortgage and bring it to current status. In some cases of high-equity properties, lenders may be open to payment arrangements.
3. Statement of Defence
Submitting a statement of defence to the courts is quite expensive, and there are very few acceptable reasons a borrower would be approved to one. For example, if the foreclosure documents filed by the lender are inaccurate or the appraised value is far off base, these may be valid reasons, but the legal expenses to do so will fall upon the borrower.
4. Demand of Notice
A demand of notice essential is a statement that borrowers desire to be kept in the loop concerning the status of a home’s foreclosure. This can be useful to owners attempting to sell the home themselves or are trying to get additional time to save enough to save their home. The demand of notice leaves no room for surprises.
5. Quit Claim
This is where a borrower simply agrees to hand the title over to the lender. This isn’t a recommended action to take in effort to avoid foreclosure actions without legal counsel, as owners are literally giving over any rights to the home and will likely incur additional financial penalties.
6. Consent to the Foreclosure
This is a situation that also requires legal consultation, but it might permit owners to stay in the home longer with certain stipulations and agreements being made with lenders. However, there can be steep costs, and it’s not the first course of action to consider.
How To Stop Foreclosure?
Many factors go into the foreclosure process of Alberta homes. Lenders can start the process with only one missed payment. But missed payments aren’t the only reasons a lender may pursue foreclosure. Lenders can foreclose on a mortgage for your property for the following reasons:
- Property taxes not being paid
- HOA membership dues not paid
- HOA membership fines not paid
- excessive property damage not being repaired
A home seller must keep in mind that if a mortgage lender grants a mortgage to a buyer, walking away from the loan isn’t as easy as it sounds if the buyer cannot meet their mortgage obligations. In addition, the lender will incur legal expenses due to filing a judicial sale, which is another potential repercussion.
This process is called a Judicial Sale in Alberta, and lenders will receive the remaining mortgage balance and their expenses if a deficiency judgment is granted to them.
Foreclosures of Alberta homes will proceed through the following steps.
1. The Lender Makes Initial Contact
After the first payment is missed, lenders commonly contact or write the owner. However, when lenders begin the foreclosure process, they are legally entitled. Still, most of them will provide Calgary homeowners with foreclosure assistance by arranging a delayed payment arrangement instead of initiating the foreclosure process, which takes time and money.
2. The Lender Makes Initial Contact
Lenders will send a demand letter if a homeowner cannot be reached by phone or does not respond to a letter after the second payment is missed.
If the lender, collection agency, or attorney sends a demand letter to the owner, they must immediately pay any arrears and any late fees to stop the foreclosure. This letter can come directly from the lender, a collection agency, or the lender’s attorney.
3. The Claim Of Foreclosure Was Filed
If the lender files a claim with the Court of Queen’s Bench, he will then provide the Alberta homeowner with a statement of claim that outlines what action has been taken by the lender to reclaim the title to the property.
The owners ‘ responsibility will be all additional expenses, such as the attorney’s fee for filing the claim and any other costs incurred during the foreclosure process.
4. Don’t Answer The Phone Or Write Letters
A borrower can choose to ignore the calls or letters and do nothing, but this is not a recommendation by any legal counsel, and it is an option that many will choose.
Once the grace period has expired, the lender can proceed with the foreclosure. The lender has provided the borrower with a grace period to correct the situation.
5. Make Up The Missed Payment During The Grace Period
A foreclosure can be stopped during the redemption period, which runs from three to six months before a final foreclosure decree has been issued. If your home is experiencing foreclosure, you can pay your arrears during the grace period.
Many lenders are willing to make payment arrangements in certain circumstances, such as high-equity properties. So call us today, and we will sell your house quickly.
6. Declare Your Defense
There are some instances in which the courts may approve this option, such as inaccurate information included in the foreclosure documents or an incorrect valuation. It will be the borrower’s responsibility to file a Statement of Defense.
7. Send A Demand For Notice
Stating a Demand of Notice by the borrower is a request to be kept apprised of the foreclosure status and the Judicial Sale process Alberta courts order. This is usually done when the owner is trying to keep the property out of foreclosure by selling it or attempting to gather the funds and save their home. A Demand of Notice eliminates any surprises for the owner.
8. Claim To Quit
Attempting to stop foreclosure in Calgary, Alberta, may be possible if a borrower files a Quit Claim. An owner may be willing to sign over their property to the bank upon consultation with a lawyer. However, the owner will still be subject to financial penalties.
9. Consent To Filing Foreclosure
Another scenario that merits legal consultation is when a homeowner is permitted to remain in the home provided the lender meets certain agreements and conditions. However, this is only advisable on the very last resort list due to the high cost involved.
10. Negotiate With Your Lender
If you think that things are falling off the rails and you could lose your home, the first thing you could do to intervene is to negotiate with the lender/ bank. Negotiate a new mortgage repayment plan – you’ll be surprised to know that most lenders are willing to negotiate repayment plans rather than foreclose on the property. The only catch is that you’d have to play by their rule, and you’d have to make the payments regularly.
The lenders often give you two options – mortgage repayment or repayment plan modification. Repayment is pretty much a straightforward process – pay the owed money, then keep making the remaining monthly payments, although you may have to pay a little more than you previously paid each month
Alternatively, you could settle for a payment modification approach. Though complicated, it’s popular. However, it calls for significant changes in the lifestyle of the homeowner – the expenses would have gone up significantly, or the income reduced drastically. Whichever the case, modification plans result in lowered monthly payments and longer repayment periods. You could also choose a modified plan if you expect a fluctuation in your income in the future. Just make sure that you talk to the lender sooner rather than later.
11. Reinstate Your Loan
This means bringing your mortgage loan to its current status to mitigate foreclosure. For this to happen, you’d have to pay up the full balance amount, as well as the fees and penalties incurred as a result of the delinquency. This is also called redeeming the loan.
12. Forbearance Plan
When you forebear a loan, it means that the lender must suspend mortgages and other payments for a specific amount of time, often 3-6 months. After the lapse of the forbearance period, the homeowner would have to prepay everything owed, including deficiencies. If you are facing a job loss or a big unexpected expense, this would be a good option for you.
13. Sell Your Property
If all the options above fail or are not ideal for you, your last resort would be selling the property. If you can sell the house, do so, but make sure that the guys handling the foreclosure keep you in the loop as the foreclosure terms are sorted. The great thing about selling is that it saves your credit score and it allows you to get back on your feet.
So, if your home is about to be foreclosed, read this article to ensure that you have all the right information to save money and avoid foreclosure mistakes. If you are looking for ‘Foreclosure help Calgary’ or ‘Foreclosure help Alberta,’ reputable places like Mr. Home Buyer can help you avoid common foreclosure pitfalls. Even when you are at your wit’s end, this comprehensive guide on the Alberta foreclosure process will save you money and give you back some form of sanity.