Mortgage Foreclosures

In Saskatchewan, the procedure to foreclose on a residence is relatively similar to that of a commercial foreclosure. Farm foreclosures have their own unique procedure. A rough outline of the steps is set out below. Keep in mind that it is general only. There are many other important factors to consider. I have conducted hundreds of foreclosure actions over my career. Please call me if you would like to engage my services in appearing and handling your case. I can assist a lender or a borrower in resolving many issues, including the following:

Residential and Commercial Foreclosures

• A 30 day notice must be sent to the Provincial Mediation Board. This is a government body that will contact the borrower to advise of the lender's intent to foreclose. This office has no power to impose terms on the lender or borrower. They are mainly a potential source of information for a borrower. If the mortgage was granted by a corporation and a waiver of The Land Contracts Actions Act was contained in the mortgage, then this step may not be required. The waiver is not effective against individuals unless they assumed the mortgage without consent of the lender.
• Once the 30 days have expired, the mortgage lender may apply to court for (permission) leave to commence an action. These documents are to be served on the registered owners of the property at least 15 days before the court date. At this hearing date, the judge may grant permission or may allow the borrowers additional time to bring the mortgage arrears current, sell the property to pay out the loan, etc.. Again, this procedure may be skipped if the mortgage was granted by a corporation and the mortgage contains a waiver of The Land Contracts Actions Act.
• Once the court grants leave to commence the action, the lender's lawyer will prepare, issue and serve a statement of claim. If there is a matter to defend, the defendants may file and serve a statement of defence within the time limits set out in the Rules of Court. If not, the mortgage lender may take the next step in the action once the appropriate time has expired.
• The next step would be for the lender to apply for an Order Nisi for Foreclosure or Order Nisi for Sale. In either case, the court will specify the amount owing under the mortgage, the scale of costs awarded to the lender and a deadline for paying the arrears and costs under the mortgage. Usually the deadline (redemption period) is in the range of 1 week to 6 months, depending on the equity or lack of equity in the property. With reasonable equity, the average is 3 months. Typically, if the lender feels the net proceeds of realization against the security will more or less cover the balance owing under the mortgage, they will opt for a Final Order of Foreclosure. This means that the court will eventually place title to the property in the name of the lender. If the lender believes they will incur a material loss and a deficiency judgment is possible, it may instead ask for an order for judicial sale.
• Once the redemption period (deadline for paying arrears and costs) expires, the court will either grant a Final Order of Foreclosure placing title in the name of the lender or if an Order for Sale was obtained, the property can be sold under the court order. In the case of a judicial sale, a further court application needs to be made to confirm the sale after it takes place.
• As long as the proper judicial sale procedure is followed by the mortgage lender, deficiency judgments are possible. The exception would be where the mortgage assisted the borrower in paying the purchase price of the property. This is because of a provision in The Limitation of Civil Rights Act. When a mortgage is signed by a corporation, the lender will require this protection to be waived. A waiver by individuals is not effective.
• Persons who sign guarantees, indemnities or co-covenants can also be sued at the same time or by separate action.

Farm Foreclosures

Farm foreclosures follow a somewhat similar procedure to the above. However, there are many significant differences. Instead of the 30 day notice and "leave to commence" steps described above, the lender must serve a 150 day notice under The Saskatchewan Farm Security Act, a 15 business day notice under the Farm Debt Mediation Act and sometimes other notices such as a notice under the Bankrutpcy & Insolvency Act.

Once the above notices are served, there is a mediation process which is handled primarily by the Saskatchewan Farm Land Security Board and to some extent by the federal Farm Debt Mediation Board.

Instead of applying for "leave to commence an action", The Saskatchewan Farm Land Security Act sets out different tests for a lender to satisfy the court to be able to commence an action under the mortgage. This will vary depending on certain factors such as whether the property is a home quarter (homestead) and when the mortgage was granted.

In some cases, a home quarter (homestead) can be exempt from foreclosure, but this is not always so.

Costs that can be added to the mortgage balance are limited.

After title to land is in the lender's name by foreclosure or after a voluntary settlement, depending on the circumstances, the farmer may have the right of first refusal to buy the property when the lender is disposing of it.

Alternatives for Borrowers in Arrears

Communicate

Communicating frankly and sincerely with a lender at an early stage will often gain cooperation. Failure to communicate usually leaves a creditor with little alternative but to take court or other enforcement proceedings. Most creditors in business are prepared to work with a person to see themselves paid if they believe the debtor is sincere and making their best effort to pay over a reasonable period of time. The time to talk is at the very beginning before the creditor's patience has been exhausted. Gaining the cooperation of the lender may give a borrower time to obtain a new mortgage, sell the property to pay off the debt or raise money to bring arrears current. Keep in mind that broken promises will damage your credibility and the lender's willingness to trust and work on a solution.

Bankruptcy

Making an assignment in bankruptcy usually won't be of much help to someone in a foreclosure situation. This is because mortgages on land and security agreements against personal property are generally enforceable after bankruptcy. However, if the security held by the lender is worth less than the debt owing so that the lender is pursuing a deficiency judgment, bankruptcy may be a consideration as a last and final resort. This extreme measure should only be taken after obtaining specific legal advice. Bankruptcy can have many serious undesired side effects. For further information, see my article regarding bankruptcy.

Notice: The information on this website is general in nature only. It relates to Saskatchewan, Canada and may not be applicable in your jurisdiction. It does not constitute legal advice to you and no solicitor client relationship will be established. You should seek specific legal advice regarding your circumstances from a lawyer entitled to practise law in your jurisdiction.

www.rickcarlson.com | Thu, 09 Sep 2010 13:30:45 CST1