Foreclosure is the act wherein a lender takes over the ownership of a particular property after the borrower failed to pay off his or her mortgage. It would be placed under the possession of the same, a court, an authorized entity, etc. The property is then sold in a public auction and the proceeds of which would be then applied to the balance of the loan as well as any other debts that the borrower might have incurred. This process is undertaken by the lender after the borrower has defaulted several times in the payment of the regular amortizations or has substantially contravened the terms and conditions of the loan.

Foreclosures Canada: In Theory vs. Actual Practice

Foreclosure proceedings in Canada have risen over the years, reaching its peak after the 2008 housing meltdown. In theory, foreclosure is a last resort that lenders take to recoup their investment from erring borrowers. However some experts and consumers alike are beginning to argue that foreclosure has become the goal of some lenders. This has led a lot of experts to believe that a separate regulatory body should be established to determine if foreclosure is the proper remedy before actually pursuing it.

Foreclosures Canada: In Relation to ARM

An adjustable rate mortgage (ARM) is an arrangement between a borrower and a lender for a very low initial interest rate that usually lasts from 1 to 5 years. After which the interest rate will then increase based on a specific index or market. In theory, this allows a consumer some breathing room to get their finances in order. However in the real world, once the interest rate adjusts the consumer finds it extremely hard to keep up with regular amortization payments. What is worst is that the increase is not only once, twice or thrice but is made on regular intervals.

Foreclosures Canada: What Actually Happens (in some cases)

A growing number of financial experts are accusing lenders of overly marketing adjustable rate mortgages knowing full well that in most cases, especially considering the income and expense worksheet of the consumer, these borrowers will most likely default after a few year of paying amortization. Now, even if the borrower does not default the same is left with no other choice but to pay interest only or the minimum payment which get applied to the interest rather than the principal. This leads to a situation where in the borrower is left perpetually in debt. This is worst than renting the property since rental rates are significantly lower than the interest only payments much more the principal plus interest rate.

The Lender’s Side of the Story

Lenders cry foul at being demonized as thieves who promise home ownership but leave consumers in debt, homeless and financially ruined. Lenders argue that the terms and conditions of the contract are clear, assuming it was read by the consumer. In addition lenders blame the economy for the housing meltdown.

Consumer Reply

Consumer’s argue, and this is well documented, that representatives actively or passively assist in creating borrower capacity where there is none, promising that after a few years the home can either be sold, refinanced or mortgaged a second or third time. In practice, this was a correct assumption, however it became impossible to do so once the market was saturated with requests for refinancing with everybody willing to sell and nobody willing to buy.

Are you looking for more information on Foreclosures Canada? If you are, visit http://www.foreclosures-gov.ca/ now!

Are you looking for more information on Foreclosures Canada? If you are, visit http://www.foreclosures-gov.ca/ now!

Author Bio: Are you looking for more information on Foreclosures Canada? If you are, visit http://www.foreclosures-gov.ca/ now!

Category: Real Estate
Keywords: interest rate,borrower failed,foreclosures canada,pay interest,interest rate adjusts