June 23rd, 2011 by Questions
My spouse has a mortgage on a condo which is in foreclosure. We put 25% down and the mortgage is CMHC insured so the original mortgage was 75% of the purchase price plus the CMHC insurance fee. I am not sure why CMHC insured this mortgage. Once the property is sold are we responsible for any outstanding balance due on the mortgage. I think if we are we would need to declare bankruptcy.
Posted from: Alberta
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June 23, 2011 at 10:53 am, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:
I must admit I am a little confused as typically with 25% down there is no need for CMHC insurance. Regardless of the reason for the insurance the answer to your question is pretty straightforward, if you sell the property for less than the balance owing on the mortgage, any shortfall that exists on that mortgage you will be personally responsible for. For reference, the shortfall is simply the amount the mortgage that was not covered by the sale of the property.
In terms of how CMHC relates to all of this, their presence doesn’t change things. The reason for this is that CMHC is essentially insurance for the bank. So that if you default with the bank on the mortgage, they will get paid in full by CMHC, but then you still owe the money to CMHC. So it changes who ultimately holds the debt, but it doesn’t change the net result.