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Foreclosures are an intimidating process. Many homeowners end up acting like “deer in the headlights” when the dreaded envelope appears in their mailbox. Unfortunately, this isn’t just an ineffective strategy for preventing foreclosure, it often makes them worse.
The fact is that foreclosure processes, while they can involve a great deal of legalese, are actually fairly simple. In fact, there are several points where the homeowner can stop the foreclosure and keep their home.
Here Is What Happens During Foreclosure
The first part of the foreclosure process takes place before any courts are involved. The reason is that lenders generally prefer to avoid foreclosure almost as much as homeowners do — it is a lose-lose proposition for them, which usually ends up costing them money and a good deal of time.
This means lenders only resort to foreclosure if they believe they don’t have any other option to avoid an even larger loss. And, thanks to this fact, it’s frequently possible for a homeowner to negotiate new loan terms with their lender. They may be willing to work out a different payment schedule that allows you to bring the mortgage payments current and not need to sell the home.
The second thing you need to understand is your situation might not involve foreclosure at all. It might involve something that is, from your perspective, even worse.
Foreclosures being as expensive and time consuming as they are, in many provinces the standard practice has changed towards something called a Power of Sale. The Power of Sale lets the lender sell of your home very quickly, with minimal court intervention. The process may even finish in the space of a few weeks.
In the event your mortgage is subject to a Power of Sale instead of a foreclosure, you must act extremely quickly if you’d like to keep your house.
The Foreclosure Process
Assuming your mortgage requires a formal foreclosure instead of a Power of Sale, the foreclosure begins like any other lawsuit. The plaintiff — that is, the lender — goes to the local court to file a Statement of Claim. They serve a copy of that Statement on you — you are now the defendant.
Once you’ve been served the Statement of Claim, you are given a 20 day long window of time in which you may file either of two documents with the local court, and also serve the lender with copies: a Demand for Notice or a Statement of Defence.
In the event you don’t react to the lawsuit at all, the Plaintiff or lender notes that you have become “in default” on the court action. (Note that this is not the same thing as being “in default” with respect to the mortgage. As part of filing for a foreclosure, the lender already claimed that you had defaulted on the loan.)
If you are declared “in default” with respect to the court action, this means you’ve decided not to fight it. You won’t receive any further chance to defend yourself against it, nor will you be notified regarding the ongoing court case.
No matter whether you choose to defend the foreclosure or which documents you file, the lender will next file several more statements with the courthouse. Usually one of these involves applying for a remedy to the court — a remedy being the legal term which means a way to recoup the mortgage.
At this point, the court almost always issues an order. Especially if you’ve decided to defend the foreclosure, the court usually issues something called a Redemption Order. A Redemption Order is in your benefit — it allows you a certain period of time (usually around 6 months, though it may be shortened or extended if someone petitions the court) in which to bring your mortgage current as well as make any additional payments which the court requires.
During this redemption period, if you can pay the ordered fees then you will stop the foreclosure. You’ll be able to keep your home.
On the other hand, if you do not redeem the mortgage (or if the court believes you have no chance to pay off the mortgage) it will issue an Order for Foreclosure or Order for Sale. These will result in you losing the house.
Preventing a Foreclosure
Even if you are not able to come up with the cash to pay the lender, the HOS Financial Buy-Back Program will connect you with private lenders who will take over the mortgage and redeem your foreclosure regardless of your credit score. What’s more, while you are in the Buy Back Program, you will receive expert credit mentoring to bring your credit score back to “good health,” and ensure you don’t face foreclosure again in the future. To learn more, contact HOS Financial today.
Please note we are not attorneys and this isn’t intended to be legal advice. If you are facing foreclosure, you should consult with an attorney.
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