A:
A. The Demand Letter
You should receive a letter from your lender’s lawyer, warning you that they have been given instructions to start foreclosure proceedings at the address you last gave to your lender. There is no legal requirement for the lender’s lawyer to send you this letter, but it is a part of Alberta’s practices.
If you can make up your arrears at this stage, you will be obliged to pay the money to the lawyer. You agreed to pay the lender’s lawyer’s fees as a part of your mortgage obligations. The lender’s lawyer has not simply written one letter to you as a part of this process. Rather, they will have reviewed written instructions from their client, and will have reviewed the lender’s files and supporting documentation, too. The costs incurred by the lender’s lawyer in doing so are your responsibility.
If you are not in a position to make up the arrears and pay the fees of the lender’s lawyer, the lender’s lawyer will have no choice but to issue a Statement of Claim, which begins the lawsuit against you. At this point, you can save some of the costs that can accrue in a lawsuit by volunteering to accept service of the Statement of Claim from the lawyer. Service means that you have been given a copy of the document starting the law suit. Review Costs.
B. The Statement of Claim
In Alberta, if you do not respond to the demand letter from the lender’s lawyer, a Statement of Claim starting a lawsuit against you will be issued through the courts. As of April 2009, you will have 14 days to respond. If you do not respond, you will be Noted in Default, and the lender will be able to proceed in the foreclosure without further notice to you. A Statement of Claim outlines why the bank is asking the Court’s permission to foreclose on your home.
If you have not volunteered to accept service a process server will be hired to locate and serve you with the Statement of Claim. The costs of this service and any court applications required will be added to your judgment.
C. Replying to the Statement of Claim
In Alberta you have one of five choices. You can:
1. Ignore the fact that you are being sued. This is a very poor idea. You will be Noted in Default. Once Noted in Default the lender’s lawyer can proceed without any notice to you of any steps in the legal action they take. Foreclosure and judgment against you can occur in days; OR
2. You can negotiate a Quit Claim. That means giving the title of your property to your lender. Most lenders will require that you retain the services of a lawyer to do so, because the Courts will require a Certificate of Independent Legal Advice before they will approve the process. This is a drastic step that does require the services of a lawyer. It also means that you will be required to move out and give up any equity you may have in the property; OR
3. You can file a Demand of Notice. People who have no equity (or financial value) in their property and who have no hope of ever getting the mortgage caught up or paid out may want to file a Demand of Notice with the courts. That will require that the lender’s lawyer keep you advised of any court applications they are taking in the foreclosure lawsuit. That in turn will result in increased costs against you, but will give you the opportunity to ensure that all of the steps were properly taken and to dispute any problems that might arise in Court. For instance you may want to:
a. Ensure that the amounts that the bank says you owe in principal or interest are correct. This is always worth checking as someone could have made a mistake.
b. Review any costs that have been awarded your lender during the process. Examples:
i. Your mortgage agreement may have specified a $25.00 fee for NSF payments, yet begin charging you $150.00 because of an internal lender policy. That is not what you agreed to pay and you can dispute that.
ii. You agreed to pay the bank’s “costs” in collecting. The bank may include a fee for $500.00 for opening a foreclosure file, when it actually cost the lender $50.00 out of its pocket to do so.
c. Review the Lender’s lawyer’s fees to ensure that they have been
reasonable from the Court’s point of view (not yours – the Court’s have officials called Taxation Officers whose job it is to review lawyer’s fees to ensure that they were reasonable in the circumstances); OR
4. File a Statement of Defence. Filing a Statement of Defence means that you fully intend to defend the lawsuit, and contains reasons why the lender is incorrect in suing you. For example, they may have named the wrong party or the amount they are suing for is grotesquely incorrect. Choosing this route will require that you participate in each step of the lawsuit and can result in a huge amount of costs against you. That will in turn dramatically increase the judgment against you. You should be very sure that the lender is incorrect in a major way before choosing this route, OR
5. You can negotiate a Consent Order for Foreclosure. The Court will require that a Certificate of Independent Legal Advice being attached to the Order before they will accept it. The certificate proves that you have received independent legal advice, which means hiring a lawyer. If you have lots of equity, or value, left in your home, but just cannot make up the arrears you owe, a lawyer may be able to negotiate a longer period of foreclosure, during which you can live in your home before being forced to vacate. That would also give you the opportunity to find a private buyer, rather than face a court ordered auction.
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