The story takes place in 2007. A couple from Chicoutimi mortgages their residence. He borrows about $110,000 from the bank. In 2009, he borrowed another $20,000. But the couple soon stopped paying their mortgage payments, insurance premiums and taxes. A few months later, the bank became the owner of the house without a sale.
Accept payment
When a bank has a mortgage on a house, it has special rights to it. One of them is becoming the owner of the house if you don’t make your mortgage payments. This is then referred to as receipt of payment. The bank becomes the owner of the house and has to pay the unpaid loan. In return, you don’t have to pay him anything anymore.
The process is not always to the bank’s advantage. You lose if the value of the house is less than the outstanding loan amount plus late payment interest. However, the bank doesn’t just take into account the amounts you owe it. In his calculation, he also takes into account your back taxes as well as some of your other debts that he would be liable for once he becomes the owner of the house.
In the case of the Chicoutimi couple, the judgment does not address the value of the residence when the bank became the owner. We therefore do not know whether she carried out a lucrative transaction by purchasing the apartment and not by the couple repaying the loan.
A right that is anything but automatic
The bank’s right to collect debts does not arise automatically. First, the financial institution must send you a strictly regulated document called a “mortgage notice.” This document is transmitted by a bailiff. The bank must communicate its intention to pay and the response period of 60 days.
During these 60 days, you can avoid default by repaying any late payments with interest. You can also force the bank to sell the house under court supervision instead of taking it as payment.
In the case of the Chicoutimi residence, the owners did not respond within the 60-day deadline. The court took note of this and accordingly declared that the bank was entitled to take the apartment in payment.
Let’s imagine that the value of the couple’s residence was $350,000. If the couple had forced the bank to sell the apartment under court supervision to pay off the debt, they could undoubtedly have recovered a hefty sum. Assuming, of course, that the couple had no other debts related to the residence.
React quickly
Before you take any action on your home, your financial institution will most likely send you several reminders so that you pay the amounts owed to them. A formal mortgage notice will only be sent to you as a last resort.
Be sure to contact your financial institution immediately if you are no longer able to meet your mortgage repayments. Explain your situation. You could get a repayment plan for your late payments while you wait for better days.
What exactly is a mortgage?
We often say we’re paying off our mortgage, but we should actually say we’re paying off our mortgage.
When you buy a property, you usually enter into at least three contracts: a loan, a mortgage and the purchase itself. The mortgage on the property you buy is a guarantee that you give to your financial institution that the mortgage will also be repaid if you no longer repay your loan.
Thanks to the mortgage, your financial institution can repay the value of your home or condo ahead of other people or companies to whom you owe money and who do not have such a guarantee.