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Most homeowners need to borrow money from the bank before buying a property. It’s often a necessary but unwanted acquisition due to lenders’ perplexing contracts, extensive regulations, and steep interest rates. But what happens when you cannot meet those monthly mortgage payments? You’ll probably unwillingly experience the dreaded Quebec foreclosure process, and will be looking for help.
Homeowners dread the F-word, and for good reason. Foreclosures can leave you homeless while ruining your credit. Although lenders are required to inform you about the many consequences resulting from a defaulted loan, the Quebec foreclosure process can seem sudden and life-altering. But how do foreclosures work? With knowledge and a little effort, you can effectively meet your state and lender’s guidelines to avoid foreclosure completely.
Although state laws and lender regulations can differ, the steps of a foreclosure remain relatively similar. The foreclosure process timeline typically begins when a property owner cannot make principal or interest payments on their loan. If the loan borrower cannot assume payments or foregoes communication with the lender, steps will be taken to ultimately foreclose on the home. If a homeowner cannot pay their mortgage, the property being paid for with the loan will be seized and sold.
The foreclosure process timeline initiates when a homeowner misses their first monthly mortgage payment. You won’t be penalized immediately; most lenders allow at least a week to make the missed payment without charging late fees. If a borrower cannot meet the payments, late fees, and interest after three to six months, the mortgage company will order a Prior Notice of Exercice (PNE). The PNE provides information on the total amount owed and how much time an owner has to pay and is delivered by either a trustee or sheriff.
A creditor who intends to exercise a hypothecary right shall file a prior notice to exercise, also known as 60-day notice, at the Land Registry Office. This prior notice to exercise must report any failure of the debtor to perform its obligations and recall the right of the debtor or a third party, to remedy the default. In the prior notice to exercise, your creditor requests you to correct the defaults otherwise you are called upon by the Creditor to surrender your property within a delay of sixty (60) days reckoned from the date of the publication of the present notice at the Land Registry Office in order that the Creditor may take the property in payment or sell it in justice.
Even though the foreclosure process timeline is generally the same, there are different types of foreclosures allowed. Knowing their dissimilarities can help a homeowner resolve each with ease. According le Barreau du Québec, there are two different types of foreclosures: sale under control of justice or taken in payment. Their differences are minor but include court involvement, how notices are delivered, and the general outcome of the Quebec foreclosure process.
The sale under judicial control must always be preceded by a judgment fixing the terms of the sale, which generally follow the suggestions made to the court by the creditor in his application. If the property has not been forcibly abandoned, the creditor may submit a single application entitled Request for Forced Surrender and Conditions of Sale under Judicial Control (Clauses 795 and 898 C.p.c.). After the abandonment of the property, the creditor has the simple administration until the mortgage right is actually exercised. And the debtor’s right to frustrate the remedy may be exercised even after the judgment or the act of abandonment, until the property has been sold.
There is three modes of sale and their respective characteristics: the sale by tender, the auction and the sale by mutual agreement. Stressing that the applicable rules of the Code of Procedure (articles 898 to 901 CCP) are those relating to the sale of the property of others and relate mainly to the non-contentious context of the sale of the property of incapacitated persons, he advises incorporate in the application detailed allegations and suggestions for the court, such as the right to have pre-judgment entered, the right to demand the abandonment of the property and to claim possession thereof, the right to administer it until sale, the right to the seizure in hand in the case of movable property, the desired mode of sale, the name of the person proposed to proceed with the sale as well as all the conditions to which the sale will have to obey.
The taking into payment requires a 60 days for a real estate mortgage. When the debtor has paid one-half or more of the mortgage-backed bond, court authorization is required. However, before the expiry of the notice period, the debtor or a subsequent creditor may require the property to be sold rather than taken as payment.
The Quebec foreclosure process is time-consuming, complicated, and costly. It also comes with great consequences to the homeowner that defaults on their property.
Although foreclosures wipe out some debt, some stick with the homeowner even after relinquishing the property. The original mortgage obtained at the home’s purchase and some debt from a second mortgage can be paid after the home is sold. However, property owners are still required to pay second mortgages back to the lender if they’re not paid off in full after a foreclosure sale. When homes depreciate or there’s a significant drop in the real estate market, the foreclosure will be sold for less than what is owed. A court could decide to enter a deficiency judgment against the homeowner. The judgment holds the owner accountable for paying the difference and allows the lender to seize any other assets the property owner may have.
Another major consequence deals with the borrower’s credit. Mortgage foreclosure is considered almost as damaging as filing for bankruptcy to most tax experts. A foreclosure, no matter the type, will remain on the credit report for seven years. This seriously limits a homeowner’s ability to borrow in the future and may have a significant impact on your credit score.
There are several stages within the Quebec foreclosure process in which to bring your loan current and halt the bank from seizing your home.
The easiest way to stop a foreclosure is to catch up on the missed mortgage payments. Sometimes there are extenuating circumstances keeping a homeowner from repaying. But if you can afford it, pay them off; you’ll avoid a foreclosure on your credit and be able to continue living at your current residence.
Another way to exit the foreclosure process is by getting a loan modification to lower payments. A borrower can achieve this by either requesting their loan to be paid over a longer period or at increased interest rates. Many lenders are willing to work with homeowners to make reasonable payment options.
Homeowners can also avoid foreclosures altogether. Lenders are willing to work with cooperative borrowers, so communicate. If a mortgage company sends a NOD, don’t ignore it! Responding to the notice and staying in contact with the lender will slow the foreclosure process.
You can also prevent foreclosures by knowing how much you owe each month and save accordingly. Although this is an obvious step, many homeowners will prioritize other expenses over paying their monthly mortgage. Create a budget and save the payment due date in your calendar. Responsible homeowners keep up with what they owe.
The threat of a foreclosure can be scary to a homeowner with an existing mortgage. But knowing how foreclosures work will help you avoid the consequences of a defaulted loan. By utilizing these preventative measures, you’ll be able to skip a financially debilitating foreclosure completely, and continue to live in your dream house!
If you are facing foreclosure and have run out of options, you might consider getting a cash offer from a home buyer. Olivier Lepage pays cash for houses so that you can sell before and close before the foreclosure. This usually allows you to keep the foreclosure off your credit and keep some of your equity.
Give us a call at 514-907-1111 to learn more about how we can help you avoid foreclosure in Montreal.