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.

Alberta Courts tend to administer six-month redemption periods to homeowners like flags on Canada Day when it is clear there is sufficient equity in the home to cover any accumulated arrears and legal costs during the foreclosure process. The redemption period affords the homeowner the time necessary to either get caught up with their outstanding debts or sell the property, and, ultimately, get back into good financial standing with their lender.

A long time financial advisor, loving husband and proud father of 4 young children, Roger found himself caught in the midst of the economic downturn struggling to keeping up with his payments on his family’s home of eight years.  An unfortunate casualty from the economic recession, his employer was struggling to make payroll, employee paycheques had been delayed for over two months, and Roger was now 2 mortgage payments behind with a third quickly approaching. As expected, his lender was threatening to take legal action if payments were not caught up in a reasonable time frame.

The emotional pressure in Roger’s household was pretty intense. Several bills were delayed and the creditor phone calls served as constant reminders of their downward spiralling economic circumstances.  Yet, in spite of all the grief, Roger and his family remained very optimistic. Roger, a proud, hard-working European immigrant, focused on his core values and took full responsibility for his financial dilemma. He was eagerly looking for answers to his many questions, and doing his very best to understand what he could do to remedy what was happening around him.

Knowing full well that he had to lower his monthly expenses to be inline with his now sizably reduced income, Roger realized that he’d have to say goodbye to his home of eight years, hire a Realtor, and move his family to more affordable living circumstances.  He and his family decided to rent a home in a nearby town, get rid of their 2 cars, and begin the process of living a more modest lifestyle while they focused on rebuilding their financial picture.

His home was a beautiful acreage in the foothills of Alberta, and would easily fetch a King’s ransom during this provinces recent oil-fuelled economic boom.  Much like many higher-end properties, though, the bigger (more expensive) they are, the harder their price falls.  The market was soft and he knew he’d have to be aggressive with his pricing to sell it quickly. The clock was ticking, so he found an excellent Realtor who knew his area well and had a strong performance track record. They cleaned his already immaculate property, staged the home to perfection and readied for the stampede. Despite their best efforts, the market remained unforgiving, and his property remained listed one day to long.

Some four-months from when Roger first began this journey, his foreclosure hearing date finally arrived.  Despite the fact that Roger hadn’t sold his property and had accumulated a substantial amount of arrears, he felt good. He planned to attend the hearing, represent himself, tell the court what he had been busy doing the last four months, and let the judge know all about his genuine intentions of repaying every last penny owed to his lender.

That’s when the judge smacked him in the face.  After listening to Roger explain how he took responsibility of his financial situation, having moved his family out of his home into a rental property, worked hard to stage and maintain the property so it would show extremely well, and hire a reputable Realtor that could sell it quickly, the judge thanked him for his efforts by issuing a one day redemption period.  Not six months, not three months, not 30 days, not even enough time to go say goodbye to his home of eight years, he was given a 1-day redemption period for his valiant unsolicited, uncompensated and well-intentioned efforts.

In a province that almost exclusively honours standard six-month redemption periods to homeowners who have sufficient equity to endure it, the ruling made no sense.  The judges reasoning, albeit undoubtedly grounded in years of experience and necessarily recognizing the interest of both parties involved, remained sterile at best.

The judge reasoned that, given Rogers unsuccessful efforts to sell his property through the traditional listing channels, the market had shown that continuing that strategy was futile and a waste of the lenders time.  Ordering the judicial sale at the appraised price would ensure a lender received full compensation for the outstanding debt, and, after covering all legal fees and additional arrears, Roger would still walk away with some equity in his jeans at the end of the day. The court-commissioned appraised value, not surprisingly, was substantially below the Realtor’s market valuation.  In fact, it was a staggering 10% lower. In essence, the judge gave the green light for someone to ‘steal’ Rogers home.

You really have to ask; why bother?  Roger worked hard to change his situation, market his property, and do what it would take to pay back his lender.  In the end, his best efforts, inevitably subordinated by an insensitive and immobile market, didn’t serve him to rise out of his financial challenges at all.

The message I get here leaves a very bad taste in my mouth.  If Roger would’ve sat on his duff, unplugged his phone, and let the system work itself out without lifting a finger, would the judge have been more lenient?  Would the court have allowed Roger a respectable redemption period, offered the market one more traditional listing, afforded him the space and time he needed to sell his home, aiding him the right to avoid being foreclosed on and keep his credit intact?  The insensitivity of the whole thing chars my taste buds and leaves me feeling raw.

Apparently, though, the lesson is mine.  Roger’s well-intentioned efforts are admirable and commendable. He took full responsibility for his financial situation, his debt to his lender, and his responsibility to give his family a stable home and a happy life. He worked hard to remedy a solution that would avoid this seemingly inevitable result, and yet, he remains optimistic and hopeful for a bright future.  The lesson I get here is not how the system can punish, but how leaders like Roger inspire one to lead a value-driven life. Putting your head in the sand serves no one. When the buck stops here, action conquers fear.

Thanks Roger, your leadership inspires us all.  We wish you all the best.