A look at alternatives to Alberta foreclosure

Borrowers and lenders alike may find alternatives to foreclosure advantageous when mortgage payments have gone into arrears.

When Calgary homeowners or business owners with real estate face financial problems that could impact the ability to make timely mortgage payments, the threat of possible foreclosure may arise. This concern is increasingly realistic. For example, a January 2018 CBC article cites two real estate professionals who both concluded that Calgary foreclosures had risen recently by 30 percent.

Given this upward trend, both lenders and borrowers should take a broad and early look at alternatives to foreclosure. Other options to resolve mortgage delinquency may save both parties time and money, depending on the circumstances.

Proactive, viable options may include:

  • Mortgage refinance: The lender may be willing to refinance the loan at terms that would lower monthly payments and allow the borrower to afford them, preserving property ownership and occupancy.
  • Payment plan: The bank or other mortgagee could be willing to negotiate with the borrower to create an affordable repayment plan to bring the loan current.
  • Sale of mortgaged property: The property owner may decide after consultation with a lawyer, financial adviser or real estate professional to put the property on the market, allowing repayment of the delinquent mortgage from the proceeds and retention of remaining equity.
  • Extension of redemption period: If the mortgage has a redemption period (usually six months) during which the home or business owner has the right to make up late payments before foreclosure begins, the lender may be willing to agree to extend it if the mortgagor can show a realistic ability to repay in that time.
  • Financial overhaul: A distressed borrower could work with a reputable financial adviser or credit counsellor to examine the mortgagee's financial situation and create a budget that redirects discretionary spending in a way that will allow the property owner to catch up and handle the ongoing mortgage payments. Consideration of liquidating investments or assets, or of exploring ways to earn additional income may be options to raise money to help bring the loan current.
  • Deed in lieu of foreclosure: In this arrangement, the borrower signs over the home to the bank, giving up its interest in the property in exchange for foregoing foreclosure.

When an Alberta mortgagor faces the loss of employment or other situation that will affect the timeliness of mortgage payments, he or she should talk to a lawyer early to understand options to resolve the matter and prevent foreclosure. Similarly, Alberta lenders and mortgagees can consult with legal counsel to explore alternatives in lieu of foreclosure that may be in their interests. Early negotiation and information sharing between the two parties may result in resolution advantageous to both.

An experienced real estate lawyer can also help to prevent the involvement of unscrupulous parties who may run a variety of scams in which they make promises to delinquent borrowers to help repay the loan. It is a good idea not to sign over your property or enter into a contract with a third party without the advice and review of a lawyer.

Lawyer Cass Lintott and his team of professionals at Lintott Law in Calgary, Alberta, represent lenders in their efforts to resolve mortgage defaults as well as home and business owners facing the possibility of foreclosure throughout the Calgary area, including in Airdrie, Canmore, Cochrane and Okotoks.