Lender Refuses to Renew, Owners Face Foreclosure

You’ve been making all your mortgage payments, paid all your property taxes, and kept the home properly insured and maintained.  And you’re still being foreclosed on.  How would you feel?  How can you avoid it happening to you?

Unfortunately, this isn’t a hypothetical situation. It’s happening here in Alberta, now.  Bill Fric, with Fric, Lowenstein & Co. LLP explains:

How can this happen? It happened because the mortgage came up for renewal, and the mortgage company refused to renew.

They had mortgaged their house through a mortgage broker and the Lender was GE Money. GE Money told them that it no longer wanted to renew.

The clients are self employed. They are not able to qualify for a mortgage at this time.  Also, the house is valued at no more than what is owed on the mortgage.

This may be a one shot instance.  However, in the 1980’s many small mortgage companies refused to renew mortgages in Alberta. Basically they were pulling their money out of Alberta in light of the property devaluation that occurred here at that time. I have heard rumors that more of the small lenders are doing that now.

As home buyers, you should be looking for a mortgage that guarantees the right of renewal so long as you are in good standing under the mortgage. Most major banks guarantee that right in their mortgage but some of the smaller lenders do not.  Getting the lowest rate isn’t all that matters when shopping for a mortgage.

2 responses to “Lender Refuses to Renew, Owners Face Foreclosure

  1. Although obviously this is a bad situation. I think in order to provide some important context to this discussion I think it is relevant that GE Money is/was a sub prime lender. It is likely that these people and others like them would not have been able to buy the home in the first place either due to credit and/or income issues when they bought.

    I think it is a blanket statement to say small lenders will choose not to renew. In my experience in the mortgage business (20 years) every lender will renew regardless of a guranteed renewal policy or not, provided they are still lending.

    The reason GE money is not renewing has less or nothing to do with these people and has everything to do with the fact that they are not lending at all due to the virtual drying up of the sub prime market.

    As a sidenote, for ALL self employed borrowers today, the ability to qualify for a standard mortgage is incredibly difficult. The lenders (with pressure from the govt I think) have re-wound the clock 10 years for self employed borrowers.

  2. Greg, thanks for shedding more light on this. Might you be able to elaborate on this point:

    “Due to the virtual drying up of the sub prime market”

    What is the cause of the “non-prime” market drying up? Even TD just announced it’s pulling out.

    And further, what course of action do you recommend for those that are in good standing but with a sub-prime lender and are approaching their renewal?

    Thanks!

    Related article regarding “Orphaned homeowners” & Xceed back in 2009.

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