The mortgage foreclosure process in Canada



The seizure is a scary word. This is an extremely unpleasant process that implies that a homeowner potentially loses possession of his home due to his inability to make his usual mortgage payments. Unfortunately, many Canadians find themselves in a seizure each year, or at least giving up their title deeds. One of the main causes of foreclosures occurs when homeowners, in order to purchase the home entirely, end up getting a mortgage debt that is far too cumbersome to manage. Given the cost of such a purchase, it is common practice to take out a mortgage to buy a house. However, taking too much debt to claim title can lead to the dark road to foreclosure.

Increased debt due to increased risk of seizure

Increased debt due to increased risk of seizure

As Canadian household debt rises, homeowners are finding it increasingly difficult to manage all their monthly bills, including mortgages. With interest rates close to all-time lows, stable inflation and rising demand for housing, household debt in our country seems to continue to rise. The more the average homeowner is in debt, the higher the chance of default.

Lenders exhaust all options before resorting to foreclosure

Lenders exhaust all options before resorting to foreclosure

It’s no secret that seizure is not a pleasant experience for anyone. This is not only disastrous for the homeowner, but it is also a source of trouble for the lenders who have to deal with it.

While the homeowner ends up losing his home, the lender is stuck in the legal trouble and expense associated with attempting to retrieve the property. The process can be long, exhausting everyone involved. Lenders will try by all means to solve the problem before opting for foreclosure.

Seizure does not always mean the loss of a home

Seizure does not always mean the loss of a home

If you are a homeowner, it is essential that you understand what the foreclosure process is and how to defend yourself. It is commonly accepted that seizure means that you will automatically lose your home, but this is not always the case.

Several factors come into play when you are faced with a seizure:

  • Your specific financial situation
  • Your willingness to work with the lender to find a solution
  • Whether or not you choose to properly defend your home against seizure

Obviously, if you choose to take no action, you can certainly expect to face the seizure and loss of your home.

Understanding the seizure process in Canada

Understanding the seizure process in Canada

Missing a mortgage payment may not be a good thing, but it will not immediately put you in foreclosure. Generally, you must miss at least two payments before your lender begins the foreclosure process.

As a homeowner, your best bet is to contact your lender immediately after missing a single mortgage payment to explain why. Your lender will probably be more willing to accept a late payment, work with you to rectify the situation and restore your payment schedule, rather than following the foreclosure process. If missed payments are simply the result of temporary financial problems, you may be able to avoid foreclosures and request specific concessions on your mortgage payment schedule.

However, if the default on your mortgage payments begins to become a habit, your lender may have no choice but to begin the process of repossessing your home. If you do not contact your lender about your missed payments, you may receive a written notice from your bank warning you that the foreclosure process may begin soon.

Mortgage debt recovery differs from province to province

Mortgage debt recovery differs from province to province

Seizure can happen to homeowners across the country, regardless of the province in which they live. However, the process may differ slightly from one province to another.

Power of sale is more prevalent in Ontario, Newfoundland, New Brunswick and Prince Edward Island before the foreclosure process

Power of sale is more prevalent in Ontario, Newfoundland, New Brunswick and Prince Edward Island before the foreclosure process

In Ontario, Newfoundland, New Brunswick, and Prince Edward Island, lenders may choose to choose the power of sale route to avoid using the court system. It is a much faster process and can potentially lead to a resolution between you and your lender during the seizure.

But before you begin a power of sale process, a written notice and a 35-day “redemption period” will be notified to you so that you can pay off your mortgage and repay all your neglected payments. You will not only have to pay back the mortgage payments you have neglected, but you will also have to pay a number of additional penalty fees related to a power of sale. If all goes well, you may be able to get back in touch with your mortgage lender. If, however, you do not take advantage of this repayment period to get your payments back on track, you will then receive a statement of claim from your lender. At this point, you will have 20 days to file a defense. If the 20 days come and go without a statement, you are at increased risk of being fired from your home if a writ of possession is obtained by your lender from the court and properly filed.

The lender can then sell your home with the help of a real estate agent and the proceeds from the sale will be used to cover any costs. If there is money left after all contributions have been paid, they will be returned to you. Otherwise, you could find yourself sued for the remaining balance of your lender.

Seizure is most common in British Columbia, Alberta, Manitoba, Saskatchewan, Quebec and Nova Scotia

Seizure is most common in British Columbia, Alberta, Manitoba, Saskatchewan, Quebec and Nova Scotia

The main difference between a power of sale and a seizure is that the former does not require the use of the judicial system. This is why the process is much faster and can even result in a process completed in a few weeks. On the other hand, foreclosure can be an extremely lengthy process that often does not show any signs of resolution for months or even up to a year. Seizures are more common in British Columbia, Alberta, Manitoba, Saskatchewan, Quebec and Nova Scotia.

Although lenders can start the foreclosure process as soon as you miss a single mortgage payment, they usually never do so until your missed payments are over. It is in the interest of the lender (and of course yours) to reach an agreement. It is always possible to find an appropriate alternative payment plan to put your mortgage payments back on track and completely avoid foreclosure.

The input process

The input process

If you live outside of Ontario, Newfoundland, New Brunswick and Prince Edward Island and your lender is unable to use purchasing power, you risk losing money. to be confronted with a seizure from the start. This process begins a bit like a typical lawsuit in which you become the defendant and your lender is the plaintiff. The lender will file a document called “Statement” with the court, a copy of which will be served on you. After receiving a copy of this document, you have 20 days to file your response in the form of a statement of defense or a request for an opinion. If you do not answer, the lender can inform the court that you are in default regarding the lawsuit (not to be confused with the fact that you are in default with your mortgage).

If you do not answer, you tell the court that you have chosen not to fight the foreclosure process. At this point you have no other way to defend yourself. Your lender will eventually seek redress from the court to recover the money he has lent you to finance your home. At this point, the court will probably issue a buy-back order, which gives you some time for your mortgage to take sufficient value or repay it completely. If you can find enough money, you can actually stop the foreclosure process at this point.

However, if the court has reason to believe that you do not have the funds, it can go directly to the foreclosure order without even bothering with a redemption order. In this case, the property will be transferred directly to the lender. The court may also decide on a sale order, which involves a sale of the house under the control of the court. You will then have a maximum period of 30 days to leave the house after the lender (or a new buyer) has taken possession of the property.

What can you do to avoid typing?

What can you do to avoid typing?

Although it may be imminent for some, there are certainly some things you can do to avoid this ugly process and keep your home and credit intact.

  • Understand the terms of your mortgage before entering into it
  • Talk to your lender while you’re still above the water
  • Consult a low-cost or no-cost housing advisor
  • Contact a real estate lawyer
  • Determine if there are changes to the home loan that you can take advantage of
  • Sell ​​your house and reduce your living space before you miss a payment

Of course, the best way to avoid foreclosure is to not buy a house at a price that your current income might not be able to bear in the first place. That said, you can take steps to remedy the situation and avoid foreclosures before they occur.

Final word

Final word

The seizure is certainly not a pleasant experience. Losing your home can be emotionally devastating and can significantly affect your financial situation and your credit rating.

If you are having trouble making your mortgage payments, we advise you to contact your lender or consult a financial advisor who can guide you in the best direction to avoid foreclosure or power of sale.