I've been in the Calgary Real Estate Industry as a licensed Realtor since 2002. Even is this relatively short time we have been through a couple of big swings in the market. Every downturn in the economy brings foreclosures to the market.
Right now we are watching the number of foreclosures start to increase slightly. We never see the real numbers because the banks and the courts slow down the process. It takes months before these properties become listings on the Realtors MLS System.
In the meantime interest and penalty charges along with lawyer fees chip away at the homeowners equity until there is no equity left for the homeowner. The homeowner loses the house and has their credit ruined for years to come.
So what can a person that is facing foreclosure do? #1 is, do not ignore the situation. Call your banker or lender and explain your situation. No News to a banker is Bad News.
But here's a couple of things we know about bankers - They DO NOT want your house, They DO NOT want the money back. If they wanted the money back they wouldn't have PRE-PAYMENT PENALTIES.
What they DO WANT is the RENT ON THE MONEY. They want the interest (money rent) and no headaches.
I don't know for sure if this will work, but on a $400,000 mortgage the interest only payment at 2.4 interest is about $800. Less than half of a standard mortgage payment that includes Interest and Principal (Equity Payments).
If I was in this situation I would offer the bank INTEREST ONLY PAYMENTS until my situation improves and I can resume interest and principal payments.
Call your bankers ASAP if you know you might be in trouble with your mortgage and remember they do not want your house and the do not want the principal - they only want the MONEY RENT.