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Canadian Foreclosure Process

Canadian Foreclosure Process, a professional Canadian Real Estate investor should have a well understanding regarding to Foreclosure process in Canada.

Not only property owner, but also Lender consider the word “foreclosure” as their nightmares. Regardless which cycle the market is going through, it happens all the time, 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.

The property owner will not lose their property right away when he misses a mortgage payment or makes a late payment. Because the process is time-consuming and expensive; lenders don’t want to foreclose if not necessary.  A lender will probably not start to foreclose until two or three months after the borrower has stopped paying. A lender tend to send out letters asking for payment first. Then, at the same time, the lender will sue them and start to foreclose. In Canada, the foreclosure process is different from province to province.

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. To sell property, lender must apply to the court to get permission.
c. Extensive Court involvement in every step.

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 Sales.
a. Without the court’s involvement, lender is allowed to sell property. This particular way was created to keep the recovery process out of the court system, as well as created the ability to make it happen at a much faster 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.

Generally speaking, foreclosure is a losing proposition for all the parties concerned.

There is no data available to show exact figures, and the number of mortgage defaults are different from market to market. In Canada, approximately there are over 1,100 mortgage lenders. 0.26% to 0.65% is the default rate that the five major lender report.

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

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