THE FORECLOSURE PROCESS IN BC
Foreclosure is a complex process. Most of us have heard of foreclosures, but few of us truly understand the entire process. This page has been designed to reveal the mystery of the foreclosure process in BC from start to finish.
FORECLOSURE IN DETAIL
The petitioner (the one that begins foreclosure proceedings) or any of the respondents (those holding mortgages such as 1st, 2nd, 3rd, etc) can apply for a judicial sale, also known as a court-ordered sale (or a foreclosure). The purpose of a foreclosure is to end the borrower's equitable right to redeem.
In BC, foreclosures are initiated with a Demand Letter to the borrower. This letter accelerates the mortgage and gives the borrower a short amount of time to pay out the mortgage. Failing repayment, a petition is filed in BC Supreme Court. This results in an Order Nisi from the court which establishes the amount the borrower must repay, as well as in what timeframe (usually six months).
At one time judicial sales were conducted by public auction. This is no longer the case. Today, the court either orders the property sold through a private sale, or the property is appraised and listed for sale with a real estate company.
At this point, the petitioner may make an offer on the property (with the approval of the court). Should the sale take place, and the proceeds are not enough to pay off the mortgage and the costs of the sale, the petitioner can sue on the personal covenant to recover the difference. This can happen even though the petitioner may later sell the property for a profit.
The court decides upon the terms and conditions of the sale. Every offer to purchase the property must be made subject to the court's approval. The court will review an offer and accept or reject it. Once the sale has taken place, the mortgages and other charges are paid off according to their priority and the borrower will receive any moneys remaining.
A letter accelerating the loan and giving the borrower a short period of time to pay out the mortgage or else face foreclosure.
Filed in B.C. Supreme Court registry. The lender is the petitioner, while the borrower and all other charge holders whose interests rank in priority behind the lender, are the respondents.
The first order of the court. It establishes, amongst other things, the amount required to redeem the mortgage and the time period given to the borrower to redeem.
The petitioner may choose to have the property listed for sale by the court. Unless special circumstances exist, the petitioner only seeks this order at the expiry of the Redemption Period (Traditionally 6 months).
Order Approving Sale
The court approves the sale of the property. If the sale proceeds do not pay the petitioner in full, the petitioner will seek the deficiency from the respondent borrower under a court action.
Order Absolute of Foreclosure
If the redemption period has expired and if:
- the property is worth the same amount as the mortgage debt or more;
- the respondent borrower is judgment-proof (i.e., no assets or money to apply towards a deficiency); or
- there are no offers under a judicial sale; the petitioner can seek an absolute order of foreclosure, under which the petitioner becomes the new registered owner and all respondents are wiped off title. No further action can be taken against the respondent borrower after the court has granted the order absolute.
HOW TO PREVENT FORECLOSURE IN VANCOUVER
Falling into foreclosure is an experience that we'd all like to avoid. For most of us, the idea of potentially losing our home is the worst case scenario. However, given the high cost of housing in Vancouver and economic uncertainty there are also many of us that are close to foreclosure.
What can you do if you are feeling that you cannot make your mortgage payments, or if you are already falling behind on your mortgage? The first thing to remember is that banks do not want to foreclose on your property. They want to keep you as a client and will try and work with you to keep you on track and making regular payments. Try not to see the bank as an enemy, but rather as a partner that can help you to solve your financial trouble.
Do not ignore the attempts made by the bank to contact you. The problem will (unfortunately) not go away and will only become worse if you ignore the phone calls, mail and emails that the bank will be making once you fall behind on payments.
- Contact the bank and tell them what the issue is. Try and work out a plan that will help you get back on your financial feet.
- Get legal advice. Contact a lawyer that has experience with foreclosures and debt consolidation (I can recommend someone to you if you don't know anyone).
- Consider selling your home. You may be able to control the situation by selling the home and paying off your mortgage debt to the bank.
The foreclosure process is a long one. You do not lose your home immediately. Before you risk losing everything, you also have an option to sell your home, pay off the lender with the proceeds of the sale and begin with a clean financial slate.
If you'd like to put your home up for sale, I can help. I will sell your home as quickly as possible for the best possible price.