In our earlier blog “Help! The bank is selling my house”, we outlined several options when faced with the difficulty of not being able to make your next mortgage payment and possibly looking at the bank repossessing your home.
If you have been unable to successfully negotiate with the bank, the next steps that will usually occur are:
- Typically, the bank will give you a notice stating that you are in default under the mortgage and telling you what you must do remedy that default;
- Next, the bank must give you a notice that it intends to exercise its power of sale against you. There are specific service requirements for this notice which must be adhered to and the bank must give you 30 days to comply with this notice;
- If the default continues for 30 days, then the bank would ordinarily become entitled to exercise its power of sale. There is, however, ordinarily a need for a mortgagee such as the bank to take possession of your house in order to conduct the sale;
- In order to ensure that the bank does not act unlawfully in taking possession of your house without your consent, it must then commence proceedings in the Supreme Court seeking possession of land against you and/or any other persons occupying your house;
- As part of its application for possession of your house, the bank must put evidence before the Court showing that it is entitled to take possession of your house under the mortgage;
- The Court then requires that you “show cause” by providing a satisfactory reason to the Court as to why the bank should not obtain possession of your house;
- If the Court is not satisfied that you have a sufficient legal reason as to why the bank should not have possession, then it would make an order for possession in favour of the bank;
- A copy of that order must then be served upon you;
- Once the order has been served upon you, the bank may apply to the Court seeking what is called a Warrant of Possession. This warrant authorises the Sheriff to forcibly take possession of your house;
- Arrangements would then be made on the Sheriff’s part to allocate a day to take possession of your house and on that day unless you have vacated your house first, the Sheriff and the bank will take possession of your house;
- At around this time, the bank will engage a Real Estate Agent to market and sell your house;
- The bank is obliged to attempt to sell your house for the best reasonably attainable amount available at the time of sale. Often the sale will take place by way of an auction.
Up until the point where a contract for the sale of your house is entered into, you are entitled to pay out the mortgage in full if you have the means to do so, upon which payment you can then obtain your house back. Ways in which you can pay out the mortgage is by refinancing with another lender or selling your house yourself.
- However, once a contract is entered into between the bank and a new purchaser, the bank and the new purchaser will make arrangements for the payment of the sale price in exchange for the transfer of your house at the settlement date under the contract to the new purchaser;
- Assuming that the sale goes through on the settlement day, then the bank will receive the sale proceeds, take any monies due to it from the sale proceeds and then deal with any remaining proceeds by paying it to you or to any other person who might have a better claim than you – if any (which is typically the case if there is a second mortgage or some other claim to your house); and
- If there is a shortfall in the amount of the sale proceeds and the amount due to the bank, then the bank may seek to recover the difference from you in ordinary court proceedings.
It is clear that there are many stages between receiving a notice of default from the bank to the day on which your home is repossessed. Each of those stages represents an opportunity for you to attempt to address the problem with the aim of reaching a solution that allows you to keep your home.
For instance, you can resolve the dispute by:
- selling your house yourself, in order to pay the bank in full;
- arranging to refinance the monies owed and to use the funds from the refinancing to similarly pay out the bank;
- making what is known as a “hardship application” pursuant to the National Credit Code;
- in some cases, raising funds to repay any payments which are due (or overdue) but which you have not paid and the costs of the bank with the agreement of the bank;
- in addition to that above, by way of seeking an early release of some of your superannuation funds; or,
- finding some technical defect or failure by the bank to follow the correct legal procedure in taking possession of your house.
Andersons Solicitors can assist you in assessing which steps you should take in order to bring a repossession action by the bank to a cost effective outcome, preferably with the result that you are able to keep your home. Whilst we are not able to assist you in bank repossession matters at no charge, the cost of obtaining early legal advice is frequently much less than the cost and losses associated with losing your home.