Foreclosure—what a horrible word! When a loan foreclosure is looming, it means only one thing: somebody is about to lose their home. Someone has been living a nightmare and the worst possible ending is approaching fast. A mortgage foreclosure is a homeowner’s worst nightmare, and they are also difficult for the lenders—although any homeowners going through foreclosure services will not be worrying about that.
Mortgage lenders in Canada have two enforcement remedies (methods of making sure that they get their money back). The first is loan foreclosure—also known as a Judicial Sale—and the second (which is more commonly used in many parts of Canada) is The Power of Sale.What’s the difference?
Mortgage foreclosure / Judicial Sale Guidelines
The mortgage lender really only uses this method of debt recovery as a last resort—foreclosure proceedings will certainly not be started as soon as a monthly payment is missed as the process is far too costly and time consuming for that. The lender will generally give the homeowner every opportunity to rectify the situation and probably not start the foreclosure procedure for around two or three months.
- The mortgage lender must apply to the courts in order to receive the necessary permission to sell the property.
- This is a lengthy and costly process which involves the mortgage lender taking out a lawsuit against the borrower and any other parties which may be liable for the debt.
- Ownership of the property will be transferred to the mortgage lender.
- The mortgage lender may sell the property for whatever price he or she can get and does not necessarily have to obtain the highest possible price.
Power of Sale Guidelines
This is a much quicker process which is the preferred method of mortgage recovery in some areas of Canada. The courts are not involved in the process, making the whole process much quicker and easier. The other way in which this process differs from loan foreclosure is that ownership of the property does not revert back to the mortgage lender.
- The mortgage lender must send notice to the homeowner / mortgage borrower.
- The lender is free to take legal action against the homeowner only after the property is sold.
- The property must be sold for a reasonable price.
- Appraisals must be obtained for the property.
- It must have an MLS System listing.
- The sale must be performed quickly.
- The mortgagee will not necessarily recover all of his or her costs.
- Any excess monies after the sale will be the property of the homeowner.
- If there is a deficiency in the money, the lender may try to recover it from the owner.
Of course, in an ideal world, there would be no need for either foreclosure services or a power of sale. Homeowners who are having difficulty in making their payments on time need to speak to their mortgage broker and / or mortgage lender and try to make some alternative arrangements before things get too far. Visit the GLM Mortgage Group to find out all your options to avoid a mortgage foreclosure.