Understanding The Foreclosure Process

What is foreclosure, understanding the foreclosure process and how does it affect a mortgage?  Foreclosure is the legal process that happens when a lender tries to recover the balance of a mortgage that has gone into default. Often, the homeowner will have missed at least three payments, and will have received many demand letters wanting the back payments caught up.

There are other situations where a lender will consider a borrower to be in default:

  • Significant damages to the property, Ie. A fire, without proper insurance.
  • Failing to insure a property.
  • Failing to pay taxes or condo fees.

If the borrower is in default for any of these reasons or behind on payments, the Lender, may help the Borrower arrange a payment plan to get caught up, instead of foreclosing.

If the Borrower still cannot get caught up, or is in default for other reasons, the Borrower may suggest a “Quit Claim”, where the title is transferred from the Borrower to the Lender, avoiding foreclosure.  However, if the Borrower is not cooperating with the Lender, they may initiate foreclosure.

What Is Foreclosure?

A typical foreclosure follows a number of steps:

  1. Statement of Claim is filed in court, and served on the Borrower/Defendant. In the document, the Lender or their Lawyer sets out the facts of the case.
  2. Time to respond.

Once served with the Statement of Claim, the Borrower has 20 days to file and serve a “Statement of Defence”, often submitted at the courthouse.    The statement of defence may dispute facts such as the appraised value of the property, or whether the property is occupied or vacant.    If no action has been taken by the defendant, the Lender can claim the borrower in default.

  1. Affidavit of Value and Affidavit of Default are Filed.

The affidavit of Value is usually the professional appraisal of the property.    The Affidavit of default, is documents stating the balance owing on the mortgage, and any outstanding interest and penalties.   Once these have been filed, the lender may pursue “Judicial Listing” of the property. (During this phase, the borrower is allowed to stay in the house, as long as they cooperate with the “lender appointed Realtor”.)

  1. Redemption Order Is Granted.

Once the two affidavits are filed by the Lender, the court will usually grant a “Redemption Order”.

The Order grants the Borrower a specified time to make outstanding mortgage payments.   The length of time granted often depends on the amount of equity the borrower has in the property. If the payments are not made current in the specified time, the property may be offered for sale, ie Judicial Sale.

  1. The Property is Judicially Listed.

If the Lender is granted a Judicial Listing, the costs of listing the property, including the Realtor, are paid by the Borrower.

Even if an offer is made, the court must approve and accept the offer and make an order permitting the property to be sold.

If no valid offers have been made, the lender may apply to have title transferred to them.

Once a property is sold by a lender, via judicial listing, the proceeds of the sale are used to pay all debts owing.   If there are any funds remaining, those funds go to the borrower.

  1. Possession of the Property.

If the property has been sold by the lender, or the lender has been granted title, they are usually granted title within 30 days.

All occupants must move out or leave during this time.

If there is a tenant living on the property, he/she will be served with a court order requiring them to move within this period of time.

What Should I Do If My Property is  In Foreclosure?

If you have fallen behind on payments, or have defaulted on your mortgage, you may just avoid it or just be scared and move out of the home.  Neither of these are good options.    Foreclosure can be emotional and intimidating.    However, there are many ways to deal with it, that give you more control over the process, and help you protect your stake in the property.

For over 20 years, Solution Home Buyers has been helping Albertans in Foreclosure, and even if we don’t buy the property, we are here to answer any questions you have.   We are here to help you understand the process, and help you work through the best way for you to deal with Foreclosure.  If you have any questions, or want to sell a house in foreclosure, give us a call at 780-483-2006 or fill out our quick form.

The Solution to Your Foreclosure is Just a Quick Call Away! 

Check out Larry’s testimonials and how we were able to help them through their foreclosure!