As mortgage brokers, our team has the privilege of being at the beginning of the home buying process. This is when most, if not all homeowners, are excited and looking forward to enjoying their new home. In this way it’s a lot like the beginnings of a new marriage. However like some intimate relationships that “go south,” relationships between borrowers and their lenders can do the same. When folks enter into a marriage, they never do so with plans for it to end. Similarly, when homeowners purchase a home, they never do think about one day losing it. While the cause for the foreclosure can be a result of a variety of things, including divorce, long term illness, job loss and a host of things in between, no two foreclosures are the same.
No matter how you came to find yourself at this place, we feel that it’s our responsibility at Auxilium to help educate you on the process.
Below are the steps normally taken, start to finish throughout the process.
If you would like to discuss your situation in particular, contact Keith, our Foreclosure Specialist. Keith has extensive experience in this area and will do his utmost to assist you during this challenging time. If you are facing a foreclosure we recommend that you consulting an attorney.
What Is Foreclosure?
Foreclosure is the legal action that a mortgagee (lender/bank) will normally take if the mortgagor (borrower) fails to keep up their mortgage payments. The action is to take possession of the mortgaged property.
What Happens If I Miss a Mortgage Payment or Make a Late Payment?
If you miss a payment or make a payment late you do not automatically lose your home. Lenders don’t want to foreclose if they don’t have to because it is costly and takes a lot of time. Most lenders will typically start foreclosure proceedings two to three months after you stop making payments. Generally, you will be sent Demand Letters from your lender reminding you that payments are overdue. If you ignore these notices, the lender will usually start to foreclose (and possibly sue you at the same time).
If for some reason you cannot make payment but it is a short term problem, for example a temporary layoff, you may be able to make a deal with the lender to make smaller payments for a period of time, and add the amounts you fall behind to the total amount of your mortgage. Or you may be able to make smaller payments for a while and a larger catch-up payment later. Some lenders also have a ‘skip a payment’ option built into their programs but you will most likely not know about these options unless you ask. So ask! Lenders would rather make some sort of deal and keep the mortgage in good standing to avoid having to go to court.
The Foreclosure Process in BC
- Demand Letter: If you do not pay the arrears as required, the lender will ask a lawyer to start the foreclosure process. You will receive a Demand Letter from the lawyer demanding you to either pay the full amount owing on the mortgage, or only the arrears. You will be given a deadline date, after which the foreclosure process will begin.
- Foreclosure Petition: The first step in the foreclosure process is for the lawyer to file a document named Foreclosure Petition with the BC Supreme Court Registry. Within a few days after the petition is filed in the court, you will be served with a copy. The petition is sent to all interested parties including other mortgage holders, tenants in the property, other lien holders, etc. Make sure you read the petition carefully and follow the instructions of how to file a Response to the Petition.
Get legal advice right away. If you want to protect yourself and take part in the court proceedings, you must file a Response to Petition (with supporting Affidavits) within 21 days of receiving a Petition for Foreclosure. You must file the response at the court address shown on the petition, and deliver two copies of your response to the lender. Once you do this, no one can take any steps in the foreclosure without notifying you. If you don’t file a response, the foreclosure will go ahead without you, and you won’t be able to protect yourself. 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 an Order Nisi to start the foreclosure.
- Order Nisi: About a month later, there will be the first hearing in court. At the hearing the judge will give the lender an Order Nisi, and in most cases, it will also give you time to Redeem the mortgage by paying the full amount you owe, plus interest, costs and taxes. This time frame is called the Redemption Period (and is usually about six months). The lender can always ask the court for a shorter Redemption Period.*Note: The court can make an order to sell your house at any time, including at the Order Nisi stage. One good reason to attend the court hearing is to ask the judge for as much time as possible to get the money to pay off the mortgage, or sell the house. 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 try 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. You should use a lawyer in this case because a lawyer can advise you on your options – including possible refinancing, even with another lender.When the Redemption Period ends, the court can give the lender a Final Order of Foreclosure, or the lender can ask the court for the right to have their own real estate agent list your house for sale. If there are other people or companies with a charge against your house, besides the lender who started to foreclose, they may ask for the right to sell your house. If the court gives the lender or anyone else the right to sell your house, it gives them Conduct of Sale. If this happens, you cannot sell the house yourself. If anyone asks the court for Conduct of Sale for your house, you should ask the court to give you Exclusive Conduct instead. This means that only you are in charge of selling it or you can ask the court to give you at least Joint Conduct with the other person, or company, so you have some control.
- Two Possible Outcomes: Following the Redemption Period of typically six months, the lender may choose to have the property listed for Sale by the Court or seek an Absolute Order of Foreclosure from the court. If the lender gets an Order Absolute, and registers Title in its own name, it cannot make any further claims against you. It can sell the house, but if the sale does not produce enough money to pay off the mortgage, you do not have to pay the difference. Lenders do not usually ask the court for an Order Absolute, instead, 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. With this method if the money from selling your home does not completely pay off the mortgage loan, the lender can still try to collect the difference from you.
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. The second lender would then have to try to get you to pay its loss.
Please note that we are not lawyers and that this is information we have gathered in our understanding.