What Is Mortgage
Foreclosure?

When a loan foreclosure is looming, it means only one thing: somebody is about to lose their home. A mortgage foreclosure is a homeowner’s worst nightmare, and presents a difficult situation for lenders as well.

Mortgage lenders in Canada have two enforcement options to ensure they get their money back. The first is loan foreclosure and the second is The Power of Sale. What’s the difference?

A mortgage lender uses this method of debt recovery as a last resort. Foreclosure proceedings will certainly not be started as soon as one mortgage payment is missed as the process is far too costly and time-consuming. The lender will generally give the homeowner every opportunity to rectify the situation and probably not start the foreclosure procedure for two or three months.

Process:

• The lender must apply to the courts to receive permission to sell the property
• The lender takes out a lawsuit against the borrower and any other parties who may be liable for the debt, which is costly and lengthy
• Ownership of the property is transferred to the mortgage lender

The lender may sell the property for a price they determine, which doesn’t necessarily have to be the highest possible price

This is a much quicker process and is the preferred method of mortgage recovery in some areas of Canada. The courts are not involved, which makes the entire process faster and easier. In this situation, ownership of the property doesn’t revert to the mortgage lender.

Process:

• The lender must send notice to the homeowner/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
• Property must have an MLS listing
• The sale must be performed quickly
• The mortgagee will not necessarily recover all of his/her costs
• Any excess monies after the sale will be the property of the homeowner
• If there is a deficiency, the lender may try to recover it from the owner

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 or lender to make arrangements before things get worse.