The Foreclosure Process – A Conversation with Harold

If your Calgary property is going into Foreclosure in Alberta, we put together this informative video that answers many homeowner’s foreclosure questions. Just click on the video above, and send us any questions or comments you may have in the comments section, by email at info@canadahomebuyer.ca or by phone at 1-888-961-9970.

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Core Values and the Foreclosure Game

Just when you think you’ve got the Alberta foreclosure process all figured out, a curveball lands you square in the face.

In Alberta, the foreclosure process affords the homeowner the flexibility of time by honouring a suitable redemption period when it is deemed that equity resides in the subject property at the time of default. Knowing that he had substantial equity in his property, Roger was confident that he had time on his side. He was busy creating solutions that would help him payback all his outstanding arrears when, surprisingly, the Foreclosure hearing judge pulled the plug and called it quits on his noble and just plans.

To me, this story exemplifies the benefits of living from your core values.

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Foreclosure in Alberta – Legal Perspective

Talking With A Lawyer About Foreclosures

I recently had the pleasure of sitting down and chatting with Barry McGuire, a long time real estate lawyer who practices in Edmonton, Alberta.  Barry has been a real estate legal professional in Alberta for over 35 years and understands the intricacies and details of the foreclosure process in Alberta better than anyone I know.  He was kind enough to answer some of the top questions I get from subscribers on a frequent basis at CanadaHomeBuyer.ca.   Go ahead and click on the video to hear his wisdom!

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The New Normal? Economic Prespective from one of Canada’s Top Economists

I was fortunate enough to catch Benjamin Tal’s presentation in Calgary recently, presented by our friends at FirstLine Mortgage, as he discussed what he calls ‘The New Normal’.  For those of you unfamiliar with Benjamin Tal, he is the Deputy Chief Economist for CIBC  World Markets.  As usual, Ben delivered an engaging and entertaining discussion about world events and their direct impact on the national and local economies. It really is quite remarkable how Ben can make economics seem like so much fun!

As a mortgage associate with Verico MyMortgage.ca, I am particularly interested in Ben’s forecasts of upcoming bond markets and Bank of Canada decisions, as well as his prognosis of the real estate market. He always delivers a terrific amount of information and value every time he speaks.

Although he discussed several issues ranging from oil price shocks, the deleveraging US consumer, pending Fed and Bank of Canada decisions and the booming (?) US manufacturing sector, the most important message he left us with was the impact of a rogue fundamental economic indicator, the ‘Velocity of Money’.

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Personal Liability of Foreclosure in Alberta

Contemplating the personal liability of Foreclosure in Alberta is serious business. If for some unfortunate reason you find yourself in this position, you may be wondering just how much you could be on the hook for that outstanding debt you owe your mortgage lender?

If you were fortunate enough to obtain a Conventional Mortgage (defined as a mortgage based on a downpayment equal to or more than 20% of the purchase price), and you live in Alberta ONLY, the lenders only remedy in the case of a defaulting borrower is to foreclose and sell the house. If there is not enough to pay the mortgage, (known as the “deficiency”), then the lender is out of luck. On the other hand, if you have a High-Ratio mortgage (defined as a mortgage based on a downpayment amount of less of than 20% of the purchase price), that mortgage is most likely insured by one of three Canadian mortgage insurers; Canada Mortgage and Housing Corporation (CMHC), Genworth Canada or Canada Guaranty. When a mortgage goes into default, and the debts can’t be repaid from sale proceeds, don’t be surprised if the Insurers come knocking.
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Credit Counselling Caution

 

Credit Counselling

Even a passive observer knows that consumer debt levels in Canada have reached record highs. StatsCan recently reported the ratio of household debt to disposable income to be 1.48, exceeding US household debt levels for the first time in over 12 years. If this disturbs you, it should.

Personal bankruptcies and property foreclosures are a common artifact of recessions. Reported bankruptcies and foreclosures have been on the rise since the recession took hold in Canada, and more people are turning to debt solution companies to help them solve their debt woes. In Canada, someone wishing debt relief can declare ‘bankruptcy’ or obtain a ‘consumer proposal’. In either case, you need a trustee to accomplish this.
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The Personal Costs of Foreclosure in Alberta

For a homeowner in Alberta, going through a foreclosure action can be a very costly ordeal in many areas of life. These include the obvious and substantial implications it can have on ones financial stability and personal credit rating, but more importantly, the devastating impacts on ones overall psychological health and well being. The key to surviving the ordeal is educating and empowering yourself about the process to help you make positive decisions.

When a homeowner finds themselves behind on their mortgage payments and facing the daunting prospects of trying to catch-up on their overdue mortgage payments and avoid foreclosure, it can be emotionally and physically challenging ordeal. Stress occurs within the family, with loved ones, relationships, work-life balance and ones happiness. The family unit could tend to feel the effects more prominently, causing what seems like an energy draining black cloud to settle overhead. Worst of all, this type of cost is mostly unseen by outsiders. Even close family could remain ‘in the dark’ as homeowners remain silent of the financial chasm that opens beneath them.
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Rights of Redemption – A Homeowner’s Rights After the Redemption Period!

Definition: Equity of Redemption – the right of a borrower to redeem (i.e., buy back) his or her property by paying off the outstanding mortgage debt in full.

Don’t confuse this term with the Right of Redemption of a borrower. The Right of Redemption is the ability of the borrower to bring the mortgage back into good standing and recover title to their property at any time. This right exists at any time, before or after the court imposed redemption period expires, up until such time as the property is sold on the open market to a 3rd party.

After the borrower has been identified as in default, the borrower retains an equitable right to redeem the mortgage and discharge the property from encumbrance. The Law of Property Act provides periods of redemption, typically 6 months for residential property, but this is heavily dependent upon the amount of equity available in the property.

The redemption period set by the courts outlines the time period the courts have given the borrower to act before the court orders the sale of the property or affords the bank title ownership. Title ownership by the bank can be achieved either through a transfer of title to the lender or a direct sale of the property to the lender. In the latter case, the borrower no longer has rights to the property.

What is important for you to know is that if the court assigns the ownership to the bank only through a transfer of title, the borrower still has rights over the property.

Therefore, the borrowers rights to redeem the property do not end at the time the court appointed redemption period ends, but rather, remain in force as long as the bank still holds that property and has not sold it to a 3rd party. The borrower still can come back, pay all arrears and legal fees, get title back and continue with the original mortgage!

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Using Home Equity to Reduce Bad Debt

Used properly, home equity can be very useful for homeowners wanting to get out of debt. What? You say I should go into debt to get out of debt?  Well, actually, Yes! If done correctly, leveraging debt can work to your advantage. Now this doesn’t necessarily work for everyone and depending on your credit situation it may not be an option.

If you are considering leveraging equity to pay off bad debt, there are several options you should consider before taking this big step. Among others, some options include taking out a 2nd mortgage on your home-sweet-home, equity refinance, Home Equity Line of Credit (HELOC) and an unsecured LOC.  We’ve touched on the advantageous and disadvantages of 2nd mortgages in a previous article (Going Into Debt to Get Out of Debt: The Dangers of Second Mortgages), so here we will focus on equity Refinancing.

Before we can talk about debt leveraging, though, we need to have a basic understanding of ‘good’ versus ‘bad’ debt.  ‘Good’ debt is investing debt, or using borrowed assets, used to purchase items that appreciate or goes up in value. Examples would include using borrowed money to invest in real estate, starting a business, or replacing higher interest rates on credit cards with lower rate options.
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Going Into Debt to Get Out of Debt: The Dangers of Second Mortgages

Under the right circumstances, home equity can be your own personal golden goose. If you’ve lived in your home for some time and benefited from a rising local economy or made extra payments to reduce your mortgage quickly, you’ve created equity you can access.

From renovating that out-dated kitchen, paying for college, starting your own business, or paying down a mountain of debt, home equity may seem like easy money, but beware, misappropriating your homes equity could land you in deep financial straits. If you are considering taking out a 2nd mortgage on your home-sweet-home, there are several things you should be aware of.
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