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In this episode of the podcast, Len sits down with lawyer Brandon Hans to discuss the complex world of foreclosure. They break down the foreclosure process, explaining how it begins when a borrower defaults on their mortgage and the lender takes legal action to recover the debt. Key triggers for foreclosure include missed payments, failure to maintain the property, and breaches of loan agreements. The discussion covers the different approaches taken by smaller lenders versus larger banks, the legal steps involved, and the financial consequences homeowners may face, including damage to credit scores and additional costs such as legal fees and realtor commissions.
Throughout the episode, Len and Brandon emphasize the importance of early legal intervention and financial planning to prevent foreclosure. They share practical advice for homeowners, lenders, and prospective buyers, including the value of maintaining property conditions, understanding mortgage agreements, and seeking professional guidance when navigating foreclosure situations. Tune in to gain expert insights into foreclosure laws, lender strategies, and the best ways to protect yourself from the financial and legal pitfalls of mortgage default.
About Brandon Hans
Brandon joined BARR LLP as an articling student in 2016 after successfully completing the NCA accreditation process. He obtained his Bachelor of Laws from the University of Kent, Canterbury in 2014. During his time in Kent, Brandon volunteered in many student-oriented extra-curricular activities, such as the Kent Law School Mooting Program and the 2013 and 2014 Critical Law Conferences. His current areas of focus are in real estate, foreclosure law, creditor-debtor relations, and financing. In 2023, Brandon joined the partnership at BARR LLP.
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Contact Len Lane | Brokers for Life:
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Contact Brandon Hans | Barr LLP:
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Transcript
Len 00:02
Welcome. My name is Len Lane, and I am the founder and president of Brokers for Life Inc., and we are Dominion Lending Centers in Western Canada. The topic of our podcast will be about what we consider to be Real Life Mortgage Solutions. Today, we are talking with Brandon Hans, partner Barr LLP, barrister and solicitor in beautiful downtown Edmonton. We’re kind of chilly today. We’re going to talk about foreclosure and the process that happens during foreclosure. So, Brandon, welcome to the podcast.
Brandon 00:39
Thanks, Len. Happy to be here.
Len 00:41
I guess right into the nitty gritty. Foreclosure. No one ever wants to see it. We see it on credit bureaus every now and then that something’s gone awry. So, what is it for the client that actually triggers foreclosure?
Brandon 00:55
Well, I think it’s probably worthwhile to talk about what a foreclosure is before you can talk about triggering. A lot of times when I have clients come into my office, either for foreclosures or if they’re lenders, or if they’re even just buying a house, I hear the same joke that when you take a mortgage out, basically the bank or the lender owns the property, and that’s simply not the case. So foreclosure is really a lender’s resort against the property if a debt is either in default or is not paid. So, you know, put simply, it is a way to offload the property, and that might be owned by one party without that party’s permission. And so it’s basically a forced sale. It’s called, it’s been called various things throughout Alberta’s history, specifically, but you know, every province has their own version of a foreclosure, and it’s basically a lender goes to a court and says to a judge, I’m a lender. I’m owed a certain amount of money. The borrower has defaulted under the terms of our loan in some way, and I’d like to sell the property to recover the money that I’m owed. Most of the time that foreclosure is done for fair market value. This is why you’d have appraisals and real estate agents involved. And there’s a process that’s put in place through the foreclosure laws in each jurisdiction that protects borrowers as much they can, but still allows for the orderly sale of property. And so that’s, broadly speaking, what a foreclosure is. And the reason you might have a foreclosure are numerous, and it depends specifically whether or not it’s a residential mortgage or if it’s a commercial mortgage. Could be different if it’s a private mortgage, but broadly speaking, it’s just a breach of the terms of a loan. And so the biggest one, obviously, is making payments. That’s kind of the most common breach you’d see in loans. But, you know, I’ve had, I’ve handled the foreclosure of a golf course at one time that was subject to flood damage. So a river overflowed and flooded this golf course, and the golf course took it failed, to take steps to remediate the lands, to get it back to a going concern. And so obviously, if you have a golf course that grows out for years and years and years, it’s harder to bring it back to a point where you could sell it. And so that was deemed to be a breach of the loan under the kind of off, often unused, failure to maintain the land clause in a charge. So it can be kind of anything really. The most common ones that we see when it comes to foreclosures are obviously the banking payments. But then there’s kind of the laundry list of owner responsibilities. Keeping the property insured is a big one, as the property burns down and it’s uninsured, bank faces a pretty significant loss. And then there’s failure to pay property taxes, failures to pay condominium fees. In situations where you might have first and second position lenders. It’d be failure to pay the first position lender or the second position lender, whatever that may be, properties abandoned, properties used for something it’s not intended. And so you know, it’s not common that this happens. But if somebody buys a residence and tries to convert it to a restaurant or something like that, that technically would violate your mortgage, right? Because it’s not what it was underwritten for. And so those are all kind of broad triggers as to what causes a foreclosure. Most of the time, when people go and see their lawyer and they sign the mortgage, the lawyer will have this rather long, you know, usually, 30 page document that they give to the the client, and they say, you should this is what you’re signing on to when you sign up the mortgage. It’s almost like the iTunes agreement for a loan, and most of the time, people don’t read them unless something goes wrong. And kind of all the triggers of a foreclosure are found in that document, and that kind of outlines specifically what the foreclosure does. So yeah, it’s numerous. It’s not it’s not a one size fits all type of trigger, but, yeah.
Len 04:44
Just even thinking of that failure to maintain, I’m saying that would not just be a golf course that wo…
