When there is a foreclosure in Canada, the rules can seem fairly complex — but if you are a homeowner, it’s vitally important to understand when and how you need to defend yourself. Many homeowners believe foreclosure means automatically losing the house, but this isn’t always true. What happens when you go into foreclosure depends on a number of different factors, such as your financial situation and whether you decide to defend yourself and your home against foreclosure. Of course if you do nothing, you are nearly guaranteed to lose the home and have a serious stain on your credit.
What Are The Foreclosure Rules In Canada?
First, keep in mind that while lenders can start foreclosing as soon as you miss a single payment, they generally never do this. Foreclosures are expensive and time consuming, so it’s in the lender’s interest (and certainly in yours) to find a compromise. Often it’s possible to work out an alternate payment plan to bring your mortgage current and avoid foreclosure. The lender only resorts to foreclosure in order to prevent themselves from losing money, after all.
Second, it’s important to understand that in a number of provinces, foreclosures are not actually used. Since foreclosures require court intervention — which costs time and money — many provinces allow lenders to use a Power of Sale, which does not involve the court until the end. In a Power of Sale the lender can take control of the property and sell it off in a matter of weeks, whereas in foreclosures the process takes somewhere between three and twelve months.
Foreclosure Process in Canada
With the caveat that we are not professional attorneys and this is not intended as legal advice, here is a summary of the foreclosure process as it is most commonly done in Canada.
Assuming your mortgage requires judicial foreclosure and does not allow the lender to go through Power of Sale, foreclosures begin like a lawsuit. The lender, now known as the Plaintiff, files a document with the court known as a Statement of Claim. The Plaintiff also serves you — you are now known as the Defendant — with a copy of the Statement of Claim.
Once you have been served with a copy of the Statement, you have 20 days to file your reply (and serve a copy of your reply on the Plaintiff. Your reply can generally take the form of either a Statement of Defence or a Demand for Notice.
If you do not reply, the Plaintiff will note to the court that you are “in default” in terms of the court action. (The lender has already claimed you are in default on your mortgage, this is a separate kind of default.)
If you are declared “in default” with respect to the foreclosure action, this means you have decided not to fight the process and you will be given no further chances to defend yourself. You will also not be kept informed of the court proceedings.
Regardless of whether you choose to defend the foreclosure action, the lender then files a number of other statements with the court, finally applying to the court for a remedy (which is a way for the lender to recoup their money). The court almost always issues an order at this point — the exception is if the court finds that the lender had no reason to foreclose because you did not actually default on your mortgage.
Normally, the order that the court issues at this point in the case is a Redemption Order. A Redemption Order is actually beneficial to your case, since it gives you a certain time period to bring your mortgage up to date or pay it off entirely. Normally this period is 6 months, though you can ask to extend it and the lender may ask to shorten it.
During the redemption period, you can effectively stop the foreclosure if you are able to come up with the necessary money.
In some cases, usually if the Court believes you have no chance of coming up wit the money, the Court may skip issuing the Redemption Order and go straight to issuing an Order for Foreclosure or Order for Sale.
If you have not been able to make the payments the court specified during the redemption period, the court will then issue an Order for Foreclosure or Order for Sale. The former directly transfers the property to the lender (Plaintiff), whereas the second will result in a sale under control of the court. Once either the lender or the new buyer has taken possession of the property, you will have 30 days to leave.
Understanding Mortgage Foreclosure Canada
The word “foreclosure” represents a nightmare for both property owner and lender. A mortgage foreclosure in Canada is a legal action the lender can take if someone who borrowed money via a mortgage stops paying it back. Foreclosure lets the lender sell or take back that person’s house after obtaining a court’s permission.
It’s important to note that the property owner does not automatically lose their property if they make a late payment or miss a mortgage payment. Most lenders prefer not to foreclose if it’s not absolutely necessary — Canada’s foreclosure process is expensive and lengthy. Generally, lenders do not start foreclosing until two to three months after the borrower stops paying.
The lender will first mail the borrower letters which demand payment. Only if they do not get a reply will the lender start foreclosure proceedings and generally also a lawsuit at the same time.
It’s important to note also that foreclosures differ from province to province. Traditional foreclosures are more common in British Columbia, Saskatchewan, Alberta, Manitoba, Nova Scotia, and Quebec. On the other hand, much more common in Ontario, Prince Edward Island, New Brunswick, and Newfoundland is a process known as “Power of Sale” — this does not require a court’s involvement and tends to go much faster.
What Happens When a Lender Starts Foreclosing?
If your property is located in a town which has a Supreme Court Registry, the lender must start the legal proceedings there. When they do, you will be mailed a document known as a “Petition for Foreclosure.” This is the official notification from the lender that they have asked the court to help get back the money the lender loaned you.
What Should I Do If I Receive a Petition for Foreclosure?
You should immediately get legal advice. In order to take part in the proceedings and protect yourself, you will have to file what is known as a Response to Petition, including supporting affidavits, inside 21 days of receiving the Petition for Foreclosure. (The Response must be filed at the court address listed on the Petition, and you must also deliver two copies of the Response to the lender.) Depending on the jurisdiction, you may also have to file other forms.
After you have done all this, you will be notified if anyone takes any steps in the foreclosure process. On the other hand, if you do not do this, the foreclosure process will proceed without you, and it will not be possible to protect yourself.
Once your Response to Petition is filed with the court, you will receive what is known as a Notice of Hearing. This tells you the date and time when the lender will appear before the judge to ask for what’s called an “order nisi” in order to begin the foreclosure.
What Happens at The Foreclosure Hearing?
Generally the court will go ahead and give the lender the “order nisi” as requested, but it will generally also give you some time to “redeem” your mortgage. You can do this by paying off the full amount owed, plus taxes, costs, and interest.
The time you are given to pay off the mortgage is the “redemption period.” It is usually six months, but the lender may ask the court to reduce the redemption period. It’s important to note that the court can issue an order allowing the sale of your house at any stage of the proceedings, including the initial order nisi stage.
This means it’s very much in your interest to be at the court hearing — you can ask the court to give you the maximum amount of time to pay the mortgage. You can also ask for an extension if you need more time. Of course, the court will want you to justify this request by explaining what you’ve done to pay off the mortgage so far, and will want to know what your chances are of paying the mortgage off on your own.
For this, the services of a good lawyer will be invaluable, since they will be able to advise you on all your options. It’s important to understand that there are many more wrinkles to the foreclosure process than covered here. We are not lawyers and this is not legal advice.
The Canadian Foreclosure Process – How does the Foreclosure process Work in Canada
SAVE YOUR HOME with a Refinance Buy Back!
There is a revolutionary concept which is allowing more and more families stay in their home when facing Power of Sale or Foreclosure. It is called Refinance Buy Back which you can prequalify for on our website. One part of the Canadian Foreclosure process is Real Estate Investors buy the home from the family facing Power or Sale or Foreclosure. The family STAYS in the home while a company like Home Owner Soon will work with the family to correct the issues that got them into Power of Sale or Foreclosure position and they take back till at the end of the mortgage foreclosure process. They retain their equity, they do not have to move, and it is a win win for all parties involved.
In the last few years, housing values have been deteriorating in certain areas across Canada. In addition to this, personal debt loads have exceeded record highs, the national unemployment rate has skyrocketed and personal bankruptcies have increased sharply. Due to these factors, it’s no surprise that the number of Canadian families facing Power of Sale or Foreclosure is also rapidly increasing in British Columbia, Alberta, and Ontario Canada Foreclosures.
Canadians Facing Foreclosures or Power of Sale statistics
The exact number of Canadian families facing foreclosure or power of sale is still unknown. Unlike the United States of America, Canadian foreclosure statistics aren’t publicly available. According to most experts, including the ones with the Bank of Canada, the number of Canadian foreclosures has been rapidly increasing because of the poor economic climate.
It is worth mentioning that many homeowners in Canada are holding mortgages much greater than the value of their homes, especially those who acquired the 40 year, Zero Down mortgages (Currently Defunct). This has been adding to the number of Canadian families facing foreclosures or power of sale. Why? Because a lot of these families did not qualify for these mortgages when Banks were taking on anyone as clients…good or bad credit… or no money down!!
When these families have to renew their mortgages there may be issues. If these issues cannot be addressed through traditional means…the families are being forced into Power of Sale Foreclosure to settle the mortgages which are not being renewed.
Many Canadians wonder what steps need to be taken if they find themselves on the brink of Power of Sale or Foreclosure. It is worth mentioning that, unlike the United States of America, you don’t have the specific option to turn in your keys and just walk away.
In Canada, the homeowner has to handle the mortgage debt, and not the lender. Moreover, the lender can take necessary steps to recover the money from a homeowner, including garnishing wages.
How can Real Estate Investors help families!
Most full time and experienced Canadian real estate investors keep looking for good Investment Opportunities. They aim to help clients who seek and need professional help. Due to the recent economic slowdown, there has been a large market of Canadian foreclosure and Power of Sale properties. Does this automatically mean a great Investment opportunity for Real Estate Investors…maybe!
According to most real estate investors, this market has been available and growing for a while because many families have suffered from the effects of recession. While the effects of the recession have no doubt caused an increase in the number of Power of Sale or Canada Foreclosure Properties available, it does not mean these properties “all” represent good Real Estate Investments. The Great investments lie with families who have suffered through life events which has caused them to fall into Power of Sale or foreclosure but do not want to sell their properties…this is where the GREAT Investment opportunities lie for Real Estate Investors.
Basic Difference Between Judicial Sale and Power of Sale
Depending on the area you live in, money lenders are likely to go through a Judicial Sale or Power of Sale to recover their debts. The basic difference is that a Judicial Sale process focuses on going through the legal system. On the other hand, Power of Sale process allows the money lender to sell your property without any involvement from the legal system.
What to do When You Face Canadian Foreclosure
If you receive a letter from the lender or bank threatening a Judicial Sale or Power of Sale, the first thing you need to do is contact the lender immediately. If you’ve been making the mortgage payments on a regular basis but now something rare like an injury, job loss or illness forced you to miss some payments, the lender may not find it very difficult to look for other options. Banks these days are somewhat emotionless and if you find yourself in a life changing situation and Banks want their money back…where do you turn?
When facing Foreclosure or Power of Sale, Selling Your Home is Not Your Only Option. Seek out traditional help from your bank. If they say no and you want to stay in your home seek out a speciality company who features a refinance Buy Back program…a company like Home Owner Soon. These programs can put you in touch with a Real Estate Investor…get your credit repaired…get your debts settled and put you in a Great Position for the future. Don’t sell your home! Seek our Help and we will find a way to escape Power of Sale or Canadian Foreclosure!
