Guidelines

Section C: Realization and Claim Submission

1 Default, Notice of Default and Demand for Repayment

1.1 Default and Required Procedures

A default occurs when a borrower fails to comply with a material condition of a loan agreement, including any amendments (e.g., revision of repayment terms, etc.), a deed of hypothec, or any other document signed by the borrower and the lender. To be material, the failure to comply must have the potential to affect the collection of the loan. Material items could include a borrower's failure to make interest and/or principal payments, to maintain insurance, to pay property taxes, or to dispose of a secured asset without authorization, provided these were required as part of the loan agreement between borrower and lender. A minor failure on the part of a borrower, such as late filing of yearly statements, would not be considered material and therefore would not amount to default.
Regs s.36; Bulletin – September 2000

Follow Normal Lending Practices: In a situation where loan payments are current, but a borrower is found to be in default of some material condition that could jeopardize the lender's ability to realize on security or otherwise recover the loan balance, the lender may follow its normal lending practice in taking action against the borrower.

Notice of Default: If a default situation is not remedied and the lender and borrower cannot agree to amend the loan agreement to remedy the default, the lender may send a Notice of Default and demand that the borrower comply with the conditions specified in the notice within a specified period of time. Regs ss.37(1); Bulletin – September 2000

Demand For Repayment: If a borrower fails to comply with the conditions in the Notice of Default, the lender shall issue a demand for repayment within a specified period of time.
Regs ss.37(2); Bulletin – September 2000

Note: The lender can use one document to issue the Notice of Default and demand for repayment.

1.2 Time Limitation for Claim Submission

The time limit for submitting claims for loss is 36 months and begins on the date when the period specified in the Notice of Default expires.

If the lender does not send a Notice of Default, the 36-month period will begin on the day after a final payment amount is received from the borrower.

A "Request for Extension of Claim Submission Date" form (see Section D) must also be submitted within 36 months following the expiration of the period specified in the notice of default. Regs ss.38(2) and (3)