Profiting From Foreclosures in Canada Part 2
If you missed the previous article – Profiting from Foreclosures in Canada Part 1
As a full time Canadian real estate investor, we will be able to create a lot of business by helping people that have got into financial difficulty and are in the midst of the foreclosure process. Real estate investors need to understand what the process is and the options for the person in foreclosure before being able to advise or help them. We are continuing in our "Profiting from Foreclosures in Canada" series.
What if a person has a short term financial problem?
If a person just has a short-term problem, they can often work it out with the lender: maybe missing some payments and then catching up on them at the end of the mortgage. The law is generally on the side of the homeowner to try and get back in good standing.
If the lender does begin the foreclosure process, what happens first?
Essentially, the lender applies to the Court for an Order Nisi, which is the first order for foreclosure (which means an order of sale). The owner would then a document called a "petition for foreclosure", which is the lender's application to the Court.
Lender may sue the homeowner
At the same time, the lender may also sue the homeowner for the amount of the outstanding mortgage balance. The homeowner must file a document called an Appearance Document within seven days of getting the petition.
Once the homeowner does this, no one can take any steps in the foreclosure process without the homeowner being notified.
If the homeowner doesn’t file an Appearance Document, then the foreclosure will go on without the homeowner and the homeowner won’t really be able to protect themselves.
These particulars are province-specific, but quite often they are very general as well.
So after the homeowner files the Appearance Document stating that they are going to appear, the homeowner will get a notice of hearing that will tell them when the lender is asking the Judge for the Order Nisi to start the foreclosure process.
At the hearing, the Court will give the lender and Order nisi; in most cases, they will also give a redemption time to the homeowner to be able to pay the mortgage in full, or redeem the amount that they owe plus interest, costs, and taxes. This is called a redemption period, and we have an article specifically focused on that.
In most provinces, the redemption period is usually a six-month period, because they know the situation the homeowner is in, and that they have no chance of paying back the mortgage. The Court can make an order for the homeowner to sell the house at any time as well, including at the Order Nisi stage.
So the homeowner should appear in Court and ask the Judge for as much time as possible to get the money to pay off the arrears. They can even ask for an extension if they need more time, although they have to make sure that you have a good reason for the extension, and you have sources for payments in place.
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