If you’ve received notice that your bank is taking steps to foreclose on your mortgage, it can be extremely stressful. Maybe your finances are strained and you’ve missed a mortgage payment or two. Basically, lenders pursue foreclosure when a mortgage is in default and they want to sell the property to recover what’s owing. Here’s important information about the process and what actions you can take.

How it begins

Foreclosure is a legal action that the lender initiates to request permission to sell or take back a property. Going to court is costly and time-consuming so lenders will first give you a chance to settle your account. Therefore, you should expect to receive a letter demanding payment if you’re behind.
In general, banks wait until you’re two or three months in arrears before starting the foreclosure process. When they do, you’ll receive an official notice from the lender called a “Petition for Foreclosure”. To be able to take part in court proceedings, you’re required to file a “Response to Petition” with the court. After that, you’ll receive a “Notice of Hearing” that specifies the court date. If you don’t file a petition, the court will make a decision without hearing your side of the matter.

The next steps

At court, the bank will usually be given the permission they’re asking for (called an “order nisi”) to sell the property. At the same time, you can present your situation and request a “Redemption Order” from the court to give you the time you need to “redeem” your mortgage. This means you’ll be given a period of time - typically six months - to pay off the total amount owing as well as taxes and interest. While the lender can ask the court to grant a shorter redemption period, you can also request an extension of the time given. However, be aware that the court can provide an order at any point in the proceedings permitting the bank to sell your home.

What you can do

As you’ll appreciate, it’s critical to get in touch with your mortgage lender right away if you’re having difficulty paying your mortgage. Depending on the terms of your loan and the flexibility of your bank, you may be able to have some financial relief in the short-term. Alternatively, there may be a way to consolidate your debt into a new mortgage with payments that you’re able to meet.
When the bank moves to foreclose on your mortgage, make sure that you seek solid legal advice right away to review what your choices are. Having a credit counsellor go over your financial circumstances and discuss options for improvement is also a good idea. Remember, it’s crucial to attend court and present the reasons why the judge should grant you time to pay off your mortgage debt.

In closing

Keep in mind that you won’t automatically loose your house after missing a mortgage payment or even when your home is in foreclosure. If you communicate with the lender at the first sign of trouble, acquire advice and actively follow the best option in your situation, the outcome may indeed be favourable. Here’s an excellent legal resource to learn more.