By Annette McLeod
The best advice you’ll ever get about being late with your mortgage payment is not to be, but life is seldom so simple. The next best thing is taking an active approach to the problem if financial trouble hits.
The very first thing you should do is call the people who loaned you the money in the first place: your mortgage lender. Even if you know the cash-crunch is coming down the road — say, you lost your job but have enough saved up to get you through the next three months — call them now and disclose your circumstances fully.
“Contact your servicing branch!” says Michael Stechnicki, director of domestic collections for Scotiabank. “If necessary, the branch can refer you to an alternative centre within the bank that specializes in helping customers through difficult financial times.
“They will discuss each unique situation with a goal of assisting them in making payments and negotiating a reasonable solution.”
TD Canada Trust, for example, has TD Canada Trust Helps, the sort of “alternative centre” to which Scotia’s Stechnicki refers.
The bottom line: There isn’t a hard-and-fast course of action in the early stages, and the sooner you act, the better it’ll go.
It’s also true that relationships are important. Stechnicki says the bank “always takes every aspect of the relationship into account prior to making a decision.”
Tracy Axford, a mortgage agent with The Mortgage Centre in Durham Region, used to run a sales team of 12 at a credit union.
“If someone missed a payment, got a couple of weeks or a month overdue, our feeling was that we didn’t want to be a collection agency.
“We’d choose to assume they forgot, went on vacation, whatever the case.
“People get scared, but the best thing you can do is go in, talk to the lender.”
Even though her role as a broker ends when she finds her clients financing, Axford would still welcome calls from clients looking for direction.
“Hopefully your broker placed you where they did you because they have a good relationship with that lender,” she says. “The lenders want to help. They get to keep the client. They get referrals in the future. Everybody wins.
Scotiabank’s Stechnicki says being forced out of the home happens only when “all efforts and options have been exhausted by all parties. This is a last resort and rarely occurs.”
Of course, there are times when it simply doesn’t make sense to keep the house, but you still want to act long before the lawyers do.
“The bank might be okay with missing a payment or two, but if you know you can’t afford it in the long run, you need to sell it,” Axford says, especially if you have little equity.
The lender’s help, often in co-operation with an insurer, such as Canadian Mortgage and Housing Corporation (CMHC) if the loan amount is more than 80 per cent of the purchase price, can lead to a bridge loan, a longer amortization period to lower your monthly payments, a switch from a variable to a fixed-rate mortgage to save you from any future interest rate hikes, a second mortgage, or even tacking on any missed payments to the back of your current mortgage.
The worst-case scenario is a power of sale, a foreclosure method used in Ontario and some other provinces that can have you out of your home in less than two months once it gets rolling. It gives the lender the right to sell the property to recover the outstanding balance of your mortgage loan. Once the lender is paid, the new owner takes possession, and you get the balance. According to Ontario’s Mortgages Act, power of sale action can begin in as few as 15 days from default.
The best chance to stay in the home, save your credit rating, and save yourself a huge hassle, is to take action before the lawyers’ letters start coming through the mail slot.