Foreclosures Down in 2010

Good news from an economist at the Quebec Federation of Real Estate Boards. The number of properties that went into foreclosure, or were seized by mortgage lenders because of non-payment of debt, fell by 15 per cent last year to 2,356.

That compared to 2,782 properties seized in 2009. The report was prepared by economist Paul Cardinal.

How does foreclosure work? If you have a mortgage, you are bound by the terms outlined in it. Your lender will expect payment according to the agreed-upon schedule. If you fall 30 days behind in  payments, the lender will send a letter threatening action if the payments are not brought up to date. They have to warn you before beginning foreclosure proceedings.

Here's the thing. Bankers are not sitting in their money-filled towers eagerly waiting for you to default on your mortgage. They really would much rather keep you in your house and paying them regularly. If you're having temporary problems paying a mortgage because of ill health or a temporary work stoppage, it's better to tell your bank up front. Chances are they'lll work out an arrangement of some sort. The worse thing you can do is try to duck your lender.

The lender must publishes a notice in the Quebec Land Registry notifying the borrower that his or her property will be seized if the outstanding balance is not repaid within 60 days. Then they ask the court's leave to begin proceedings. The 60 days gives the borrower time to get his poop in a group. That could mean scaring up the cash to pay back the arrears. Often it means putting the property up for sale to pay off the debt and walk away with whatever equity has built up.

Here's the bad news. Once the bank has begun foreclosure proceedings that will necessarily mean extra legal costs - thousands if not tens of thousands of dollars depending on the file and the number of legal manoeuvres involved. Eventually that comes out of the defaulting party's end of the sale.

7,288 mortgage holders received foreclosure notices in Quebec last year, versus 8,809  a year earlier. That represented a 17-per-cent decline in notices sent out.

A notice does not necessarily translate into a foreclosure. About 58 per cent of those served managed to repay their arrears and hang onto their homes. That left the unfortunate 12.5 per cent who couldn't and didn't. Those 909 had their property seized and sold. 597 or about 8 per cent were able to sell their properties and repay their debts. Another 8 per cent, or 607, repaid their defaulted amounts and at least temporarily got their lenders off their back but then received second notices a few months later.

In Montreal. 175 mortgage holders lost properties to foreclosure last year, a 29-per-cent decline compared to the 247 of 2009. The hot spot in the province was the Montéregie region south of Montreal where 488 foreclosures took place, down from 586 a year earlier.  In fact, the number of foreclosures fell across the province except for in four regions, the Mauricie, Gaspésie-Îles-de-la-Madeleine, Centre du Québec and Abitibi-Tèmiscamingue.

A jump in foreclosures is often a sign of trouble ahead for the real estate market. In Quebec,  1 out of every 278 sold properties received a so-called 60-day notice last year. That compares to 1 in 59 in the U.S.  One out of every 860 Quebec properties was foreclosed upon, versus 1 of 45 in the U.S.

More significantly, foreclosures accounted for between 2 per cent and 2.5 per cent of all residential sales in Quebec last year. That stacked up against 26 per cent in the U.S.

A strong Quebec real estate market helped absorb those foreclosed properties efficiently. Over all property prices rose 8 per cent in the province last year.