Foreclosures in Canada

Foreclosure Process in Canada, The word “foreclosure” is a nightmare for the property owner as well as for the Lender. It happens all the time, regardless which cycle the market is going through, although the numbers do tend to go up during the Real estate bust cycle.

Foreclosure is a legal action that a money-lender can take if the person who borrowed money using a mortgage stops paying back that mortgage. Foreclosure allows the lender to take or sell that person’s house by first getting a Court’s permission to do so.

When a property-owner misses a mortgage payment or makes a late payment, the property owner will not automatically lose their property. Lenders don’t want to foreclose if they don’t have to because it is expensive and is a lengthy process. A lender will probably not start to foreclose until two or three months after the borrower has stopped paying. Normally, a lender will first send letters demanding payment. Then, if they don’t receive a reply, the lender will usually start to foreclose and to sue at the same time. The foreclosure process differs from province to province in Canada.
There are two main ways for lender to recover mortgage debt in Canada:

1. Judicial Sale
a. Conducted under the supervision and authority of the Court
b. Lender must apply to the court to get permission to sell property
c. Extensive Court involvement in every step
d. Process involves lawsuit against borrower and other liable parties

Judicial Sale are Primarily used in:
• British Columbia
• Alberta
• Saskatchewan
• Manitoba
• Quebec
• Nova Scotia

2. Power Of Sale
a. Allows lender to sell property without the involvement of the court. This particular method was created to keep the recovery process out of the court system and created the ability to make it happen at a much quicker rate than a foreclosure.
b. The Process is started by sending a notice to the borrower.
c. Deficiency Judgment: lender must seek action against borrower after property has been sold

Power of Sale is primarily used in:
• Newfoundland
• New Brunswick
• Prince Edward Island
• Ontario

The above information is provided as a guideline and is not intended to give a professional legal advice. Please consult a real estate lawyer for their opinion on your particular case

Generally speaking, foreclosure is a losing proposition for all the parties concerned. The number of mortgage defaults varies from market to market, and there is no data available to demonstrate the exact figures. In Canada, there are over 1,100 mortgage lenders, approximately. The five major lenders report a 0.26% to 1.0% default rate.