2009-04-20
Author: Donna Carson
What an insured mortgage does is give your bank protection in the event you ever default on your mortgage. They have an insurance policy that they can recover the shortfall from.
For example.....if your home is worth $350,000. Your mortgage balance is $375,000. You default on the mortgage and it goes into foreclosure.
The bank would get a Court Order to sell the house for the $350,000. And the $25,000 shortfall (plus the foreclosure costs) they would recover from the insurance policy, whether it be CMHC, Genworth, AIG.
The insurance carrier (not the Bank) would then proceed against you for the $25,000 shortfall.
If a mortgage is not insured and there is a shortfall, the Bank can NOT pursue you for the shortfall. It is only the insurance carrier who can.
This assumes that this is a typical, conventional mortgage. And not some type of other loan secured by your house.
In the event you have a shortfall on your residence and your mortgage is insured (whether you have defaulted yet or not), the shortfall is one of your creditors that you want to keep in mind when assessing which option is best for you. The shortfall can be included in a bankruptcy or a proposal to your creditors.
CIRP, LIT, CPA
Senior Vice President
Servicing: Calgary (Downtown), Red Deer, Drumheller, Calgary (NE), Airdrie
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