When people buy a home they almost always enter into a mortgage with a financial institution so that the cost of the house can be spread out over many years. If you do not make your mortgage payments, the creditor who gave the mortgage can foreclose on the mortgage.
Under a foreclosure the creditor becomes the owner of the property. The foreclosure procedure must go through the courts. The process is complicated and takes a long time. At any time before the Court of Queen's Bench approves the Final Order for Foreclosure, you can pay the amount owing and stop the foreclosure.
Before the foreclosure action goes to the court, the creditor sends notice to the Provincial Mediation Board. The Board will contact you. If you want their help, the Board will try to work out a solution to the problem. They can help the parties agree on a payment schedule and explore other options. Settling the matter without going to court can be beneficial because any legal fees that the creditor pays to foreclose on a mortgage can be added to the amount you already owe on the mortgage.
The judge can adjourn the matter for up to eight months to give you a chance to make up the payments. This often happens if the judge feels you are making an effort to pay the mortgage. At the end of the time, if the creditor still wants to foreclose, they can ask the court's permission to continue the process. If the judge does not adjourn the matter, they give the creditor the right to start the foreclosure action.
If no solution is found the creditor can start the foreclosure process 30 days after sending notice to the Provincial Mediation Board. The first step is for the creditor to ask the court's permission to begin the foreclosure.
You will be served with papers notifying you that the creditor is seeking leave to start a foreclosure action. These papers must be served on you at least 15 days before the hearing. They will tell you where and when the hearing will take place. You can attend the hearing. The court will give you a chance to explain why you did not make the payments. The judge looks at how far behind the payments are, how much is still owing on the property, and whether you are likely to make up the payments.
To start the foreclosure action, the creditor prepares a Statement of Claim. The Statement of Claim is a document in which the creditor states that the mortgage payments are in arrears or the mortgage is in default. The creditor asks the court for an order that allows them to foreclose on the mortgage. The creditor serves the Statement of Claim on you.
You can file a Statement of Defence that explains why you disagree with the creditor's claim. Debtors rarely file a Statement of Defence in a foreclosure, but if they do, there may be a trial. If the debtor does not file a Statement of Defence, the creditor asks the court for an order for foreclosure.
If the judge allows the foreclosure, they may still allow you more time to pay the arrears. If so, the judge gives an Order Nisi for Foreclosure. This court order is temporary and sets out the amount of time you have to pay the arrears before the judge gives the Final Order for Foreclosure. If you do not pay the arrears, the creditor can apply for a Final Order for Foreclosure.
This order is the last step in the procedure. The Final Order for Foreclosure gives Title of the property to the creditor and orders you to leave the property. The creditor registers the property in its name.
The creditor may ask for a judicial sale instead of the order for foreclosure. An order for judicial sale means that the Sheriff or a court officer offers the property up for sale. A successful sale means that the property ownership passes to the new buyer.
Usually when a creditor forecloses, it cannot go to the debtor for any more money, even if the amount owing is greater than the value of the property. There are some situations when the creditor can sue the debtor for the difference. In those situations, the creditor can ask the court for an order for judicial sale. If there is a judicial sale, the creditor can sue the debtor for any amount still owing after the Sheriff sells the property.
On the other hand, the debtor would get any extra monies if the property sells for more than the amount of the debt. The debtor will likely need legal advice in such situations.
The creditor may ask for an order for possession in addition to the order for foreclosure or judicial sale. The order for possession gives the creditor the right to take over the property until the foreclosure or sale is complete. The creditor with an order for possession may collect the rent if the property is rented out. The court may grant an order for possession if the property is abandoned, in danger, or if the debtor is abusing the property.