Foreclosure process

[kenlwilson]

I am working with one of my clients who has provided a RSP 2nd mortgage on an investors home, we will call him Mr Mortgage 2. This 2nd mortgage was required to help this person get their mortgage.

I acted on behalf of the purchaser as their mortgage broker, we will call them Mrs. Home owner, to get the first and second mortgage on their personal residence.

Mr. Mortgage 2 has informed me that Mrs. Home owner has been defaulting her payments to his RSP account for the past 4 months.

Mr. Mortgage 2 wants to know what actions he can take and moreso HOW to proceed.

I am hoping that anyone in REIN has some guidance on this issue. Can you please help with the following information;

- How does Mr. Mortgage 2 find out thru Land Titles?? or what ever gov`t area if the first mortgage is still current?
- Can Mr. Mortgage 2 in any way find out how much, if any, deliquent payments might exist with the first?
- What web site or gov`t department can Mr. Mortgage 2 access so he can collect the necessary documents for him to force a foreclosure?
- How and what steps can Mr. Mortgage 2 do with the first mortgage holder so if the proceedings go this far that he can take over the property.

I would appreciate any information on this. If anyone has actually gone thru this their knowledge and guidance would be invaluable.

If you have any additional questions don`t hesitate to call or email.

Best Regards,

Ken Wilson
40-510-8559

 

[Bankfighter]

Hello,

I am a mortgage broker as well and have had to foreclose on properties in default. It is a lengthy court process best handled by professional lawyers.

 

[Thomas Beyer]

Hire an expert (i.e. lawyer) that knows what they are doing as not all lawyers know this process !

You demand payment from home owner while notiifying 1st mortgage holder.

It may go to court .. and may take several months during which many opportunities will be given owner to come clean.

Hire an expert (i.e. lawyer) that knows what they are doing as not all lawyers know this process !

 

[GarthChapman]

Ken, I have lent 2nd mortgages to many property owners over the years, and have had to foreclose only once. That was a great learning experience for me. We collected all our money, all the interest and interest arrears, and all our legal costs. It took less than 2 months to get a Judgement and another month or so to get paid. This was largely because there was lots of equity in the property and the borrower did not want to end up being forced to sell to cover pay me out. Unless there is virtually no equity a borrower will almost always be given a6 months redemption period to pay out the delinquent mortgage before the Court will order a Judicial Sale of the property.

My take-aways from that process were:
1) Get on it right away.
2) Hire a lawyer who has lots of experience in foreclosures.
3) Do not lend beyond 90% LTV in a good rising market, or about 85% in a soft or falling market.
4) Be prepared to take over the 1st mortgage if that makes sense in the situation, to get proper control of the process (we did not have to do this).

Barry McGuire did a great presentation on this process last year, somewhat based on my story, as one of his partners (Neil Fenna) did my foreclosure as the property was in Edmonton. Neil was outstanding on the foreclosure.

 

[BarryMcGuire]

Hi Ken. The other three members replies are good advice especially that foreclosures come in the category of, "don`t try this at home!" They are tricky and complicated and time-consuming so my number one bit of advice is have your client hire a lawyer and get on it. Our Neil Fenna at Richie Mill Law Office is, as Garth Chapman said, real good at foreclosures. We are in Edmonton and I think you , the property and your client are in Calgary so your client is most likely better served by hiring a Calgary FORECLOSURE lawyer. However, if you or any other REIN member with a foreclosure problem wants to call Neil, you can get him toll-free at 1-888-333-8818.

Answers to your specific questions are as follows:
1. There is no place to find out at land titles or any other government department if the first mortgage is still current. Lenders do not report to the government. Only if the first mortgage has also gone into foreclosure and if the first mortgage lender files what they call a, "certificate of lis pendens" against the title can you then find out at the land titles office at the first mortgage is actually in foreclosure. To discover this would mean doing daily title searches which doesn`t really work.

As you have probably figured out ,the first mortgage lender won`t give you or your client or anyone else information on the first mortgage because there is no contractual relationship and, of course, because of the ever present, "privacy concerns". Sometimes second mortgages are drafted with a, "disclosure permission", already in the mortgage which tells the first mortgage lender that they have complete permission to answer any questions from the second mortgage lender. Second mortgage lenders are very aware that they might have to foreclose and getting information from the first mortgage lender is ultra-important. Read the mortgage carefully or check with the lawyer who drafted the mortgage and ask them if they include such clause. For everyone else, consider placing such a tightly drafted clause into any second mortgage where you are the lender.
2. There is no website or government department that provides the necessary documents or instruction to complete those documents.
3.. The steps that the second mortgage lender can take with the first mortgage lender vary according to the circumstances and there are too many variations to make a sensible answer in this reply. The one that applies to your client will come out through your foreclosure lawyer as this process develops and carries on. Really though, in the end, the only two choices are to essentially assume that first mortgage if the lender will allow it or your client has to put himself in a position where he can pay out at first mortgage as he forecloses on his second.

cheers

Barry

 

[llee]

QUOTE (GarthChapman @ Jun 19 2009, 11:40 AM) My take-aways from that process were:
1) Get on it right away.
2) Hire a lawyer who has lots of experience in foreclosures.
3) Do not lend beyond 90% LTV in a good rising market, or about 85% in a soft or falling market.
4) Be prepared to take over the 1st mortgage if that makes sense in the situation, to get proper control of the process (we did not have to do this).

What are the costs involved in foreclosing a property?
1) Legal fees (5%? ie 10K on a 200K property) ??
2) Real estate agent fee (6%)
3) Potential market fluctuation (8%)
4) Discount on quick sale / tear-and-wear (10%)
5) Rent / tax arrears (2%)

Since there is a (max?) discount of 31%, am I correct to say a 65%-70% LTV on residential property should be considered a safe investment?

Thanks,
Lucas