Here we go with part three of my saga with Xceed Mortgage, the lender who wouldn’t renew a mortgage and the ensuing problems you face trying to sell a property in a slow market. So the quick recap is as follows, we had a rental property that was profitable that had its mortgage term coming due. The lender in this case, Xceed Mortgage Corporation, has decided to start getting out of offering mortgages on rental properties.
Initially they offered us a one year term at 8.1%, but then pulled the offer back about six weeks before the term was due. This gave us six weeks to get tenants out, paint the interior of the property and prepare it for sale.
Unfortunately, for us, we had bought the property in the spring of 2007 with an 80% mortgage and after all the lender’s fees were rolled into the mortgage, we ended up near 84% Loan to Value. Then with the subsequent price decreases since then, we found ourselves now owing more on the mortgage than the property was worth. Our only option was to sell it and then pay the difference, or at least the only ethical way to go for us!
While the mortgage was due in the beginning of July, this left us the slow summer months to sell the property and this summer turned out to be slower than anything we had seen in years. We finally ended up with an offer mid September, but by this time, the lender had started foreclosure proceedings to protect themselves and we were scheduled for a foreclosure hearing just five days after the purchaser removed all their conditions.
Once I had the entire sales paperwork in hand (purchase contract, waiver of conditions) I called the foreclosing lawyer’s office, but had to leave a message as they were unavailable. So with no call back to me by the end of the day, I then called again first thing the next day, leaving me only around 25 hours until the hearing. This time I was actually able to talk to someone.
When I was finally able to update them on the situation, I was surprised to find out they still wanted to go to court. Their reasoning being that just because conditions were removed didn’t mean the buyer would be able to actually close. I later found out there was also some additional reason to go to court, but more on that later. So it was off to court.
Foreclosure court is pretty busy these days and although the room was full of lawyers, there were only a couple homeowners who showed up, which really surprised me. By not appearing you have absolutely no chance, but by making an appearance there is always an opportunity to be given more time or some type of option.
Anyway, about 45 minutes in, the court finally called our case and up the foreclosing lawyer and I went. I had brought along the sale documents, the condition waiver and bank statements showing I could easily cover the difference a couple times over.
When I explained this to the judge, the lawyer immediately mentioned she wasn’t aware that I had funds to pay it out and then brought up that I could just as easily leave for Florida the next day with the money. This is what I find challenging. I’m trying to do the right thing. I’m taking responsibility for everything and I get discounted as someone who would run off with essentially a drop in the bucket. In hindsight, the lawyer may be trying to protect her client, but whatever happened to people doing the right thing?
Since this was new information for the lawyer, the judge suggested we discuss it in the outer meeting rooms, so off we went. The lawyer was quite insistent that what we should do was put the order for sale through (which would damage my credit rating as once the foreclosure goes through it appears on your credit history, prior to the actual order for sale, it’s all just water under the bridge that never shows up). I explained how this would affect my credit history to which she told me my credit was already messed up due to the foreclosure. At this point, I realized she didn’t know how much I knew about the process and it reaffirmed she really didn’t have my best interests in mind.
I offered to her to put an estimate of what was outstanding in trust with her, but she explained this was too difficult for her office to do. My mind was questioning this, as how hard is it to sit on a pile of money and then return any excess?
We kind of ended up at a stalemate, but went back into the courtroom
We explained where we were and the judge ended up giving us a stay on the order until October 22nd which was the closing date. A stay is a delay on an order going through. So in this case the Order for Sale was postponed until October 22nd, the closing date of the purchase contract. Now as long as we provided the shortfall, the buyer closed and the funds were all in the lawyer’s hands by end of day October 22nd we would be good. No hit on our credit, no foreclosure on our name and we would be less one property and less a large pile of cash. Definitely, what I would consider a win for us!
Once the judge gave us the stay, the foreclosing lawyer wouldn’t even look at me. It wasn’t until I talked to my lawyer later in the day, that I found out why. You see each stage that the foreclosure moves through allows her to charge more. With the foreclosure process as each stage moves along there is a set rate that the lawyer can charge.
By having the order stayed, in effect, the order wasn’t put through and she couldn’t charge me as much. You see, the bank doesn’t have to pay this amount it comes out of the homeowner’s pocket as the mortgage holder gets all legal costs passed onto them. That is if there is any money to be received from the homeowner.
Bottom line when it comes to a foreclosure, it is in the best interest of the lawyer to take the home away and give it to the bank as this is how they can personally profit the most. It doesn’t matter if this isn’t in the banks best interest (the bank really doesn’t want the property, they just want to get paid) or your best interest (and you don’t want a foreclosure on your name!). Personally, I think it’s a fatal flaw in the system.
I’ll finish this up next week, but I hope you are learning from this and finding it helpful and educational. If you ever want to find out how the entire foreclosure process actually works, I recommend you go visit my friend Harold’s site, www.canadahomebuyer.ca which is full of information about the foreclosure process and includes many videos explaining different steps and stages of the process.
For the conclusion of my foreclosure story follow this link,
