Question

Dagwood was the registered owner of a 5 acre parcel on which there was one registered mortgage to the Bank of Montreal for $250,000.00 which was registered on October 8, 2017. On September 1, 2008, Dagwood granted an easement to Robotman for a 25 foot access strip across the eastern end of Dagwood=s property. Robotman paid $5,000.00 for that easement. On February 1, 2019, Dagwood borrowed $30,000.00 from Linus and signed a mortgage to Linus that was never registered. As of March 1, 2019, Dagwood stopped making payments on both mortgages and the Bank of Montreal commenced foreclosure proceedings, eventually causing the property to be sold for $400,000.00 through the courts. Describe the foreclosure procedure that the Bank of Montreal would follow and the position of each party at the ending of the proceedings.

Answer 1

foreclosure procedure that the Bank of Montreal would follow are:

Step 1: Payment default: When a borrower misses at least one mortgage payment, they’re in default. In general, the lender sends a missed payment notice that indicates they haven’t received that month’s payment. The lender may offer a grace period -- say, 15 days -- after which they’ll charge a late fee and send the missed payment notice. If the borrower misses two payments, the lender sends a demand letter. This is more serious than the missed payment notice. But the lender is probably still willing to work with the borrower to get them caught up on payments.

Step 2: Notice of default: After three to six months of missed payments, the lender records a notice of default at the County Recorder’s Office. The lender also sends the form to the borrower via a certified letter. At this point, the borrower typically has 90 days to pay the most recent bill and reinstate the loan. This is called the reinstatement period.

Step 3: Notice of trustee's sale: If the borrower can’t catch up on the loan within 90 days of the notice of default, the lender may proceed with the foreclosure process. The lender records a notice of trustee’s Sale at the county recorder’s office.

Step 4: Public auction: The lender (or its representative) calculates an opening bid for the foreclosed property. That price is based on the loan balance and any liens and unpaid taxes plus the cost of the sale. Then the property is sold to the highest bidder at a public foreclosure auction. After the sale is completed, the buyer receives a trustee’s deed (or other instrument) and becomes the official owner of the property. The borrower generally has three days to move out. If they don’t, the new owner can initiate the formal eviction process.

Step 5: Real estate owned property: If the property doesn’t sell at auction, it becomes a real estate owned property (referred to as an REO or bank-owned property). When this happens, the lender becomes the owner. The lender will try to sell the property on its own, through a broker, or with the help of an REO asset manager. To make the property more attractive, the lender may remove some of the liens and other expenses. Meanwhile, the lender will ask the previous owner to move out. The lender may offer the previous owner “cash for keys” or relocation assistance to facilitate the move. If the previous owner doesn’t vacate the property, the lender can start the eviction process.