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Mortgage Enforcement Solutions for Lenders
As a mortgage lender, the current economic uncertainty in this housing market and raised interest rates can lead to higher mortgage default risk. The good news is that when it comes to enforcement, mortgage lenders have options from ME Law for creditor rights protection.
The law in Ontario provides strong remedies to mortgage lenders when a borrower defaults. Mortgage enforcement remedies include appointment of a receiver, power of sale, foreclosure, judicial sale, and sale of the property by power of sale. Knowing that there are many options:
If you take possession of the real property, should you manage it yourself, appoint a private receiver, or ask the court to appoint a receiver? ME Law can help manage for judgment to posting the property for sale, right up to the closing sale of the property.
How do you deal with tenanted property? ME Law can consult with you on the advantages and disadvantages of tenant-occupied property. We can manage the tenant rent collection administration process for you.
After obtaining a judgment against the original borrower for the deficiency left after a sale, ME Law will provide a remedy to the lender if the property sale is deficient of the loan amount by way of ensuring that the guarantor is liable.
We are happy to discuss the options that are best suited to your needs in the current market trend. Do not wait, call us for a thirty-minute consultation.
The Power of Sale Process in Ontario
The power of sale process can be initiated when the lender identifies consistent missed payments from the borrowers. The lender could remedy by contacting the borrowers to determine the cause and work out a payment plan option. If these efforts fail, the lender may resort to exercising their power of sale rights. Mortgage defaults aren’t solely about missed payments; they can also involve a breach of other loan covenants such as failure to insure the property or pay property taxes. The process generally involves several steps, each with its unique requirements and timelines:
Notice of Sale - If the homeowner falls behind on their mortgage payments, the lender can issue and serve a Notice of Sale 15 days after the default has occurred.
Form of Notice - The notice must be prescribed by the Mortgages Act and state the amount claimed to be due for principal, interest, taxes, insurance premiums, costs, and other expenses.
Whom to Serve - The Notice should be served via personal service or registered mail to the borrower, their spouse, and anyone who appears on the parcel register for the property, as well as execution creditors, if applicable, the Crown, and any person who has provided written notice to the lender of having an interest in the property.
Redemption Period - Following the Notice of Sale, the property cannot be listed for sale for 35 days following the notice. This is a redemption period during which the homeowner can bring the mortgage up to date or pay off the entire mortgage debt.
Property Sale - The Lender typically sells the property using a licensed real estate agent.
Application of Proceeds - The proceeds from the sale are then used to pay off the mortgage debt and other related fees.
Advantages of a Power of Sale
Flexibility and Efficiency - A flexible, efficient, and relatively inexpensive option.
Non-Court Supervision - Operates without court supervision, avoiding unnecessary court appearances.
Control - Allows the lender to retain control over the entire process.
Irreversibility - Cannot be set aside or reopened after the sale.
Time Acceleration - Accelerates the time within which the mortgagor must pay the outstanding amount.
Clarity - A straightforward remedy clearly outlined in mortgage documentation or the Mortgages Act.
Deficiency Recovery - If a shortfall occurs, the lender can initiate an action to recover the deficiency. Similarly, a borrower can sue the lender for an improvident sale.
Abandonment Option - The mortgagee can abandon proceedings at any time, subject to s. 42 of the Mortgages Act.
Legal Rights of the Homeowner in a Power of Sale
During a power of sale process, homeowners have certain rights, including:
Right to Redeem - The homeowner can stop the power of sale by paying the outstanding mortgage balance and associated costs before the sale.
Right to Notice - The lender must provide the homeowner with a Notice of Sale at least 15 days after the default and 35 days before the sale.
Right to Surplus Funds - If the proceeds of the sale exceed the outstanding mortgage balance and associated costs, the homeowner is entitled to receive the surplus funds.
Right to Legal Representation - Homeowners have the right to legal representation throughout the power of sale process.
Right to Challenge the Sale - Homeowners have the right to challenge the sale if they believe the property was sold for an unfair price or if there were errors in the power of sale process.
Preventing Power of Sale
Preventing a power of sale is possible through several methods. Homeowners can refinance their mortgage, negotiate with their lender, or sell their home before the power of sale process begins. It’s essential to act quickly to have more options available and potentially stop the power of sale. To ensure that your power of sale process goes smoothly and without problems, contact ME Law to be consulted on all aspects of mortgage loan origination to the conclusion of a sale of the property.
ME Law will
Assess the strengths of your case and the likelihood of a favorable outcome.
Craft a comprehensive legal plan tailored to your specific business needs.
Identify and implement the most effective legal resolution to protect your interests.
Proactively address potential legal risks to safeguard your business against future challenges.
Let's talk about your case
- (416) 923-0003
- +1 (800) 891-2897
- intake@melaw.ca
- referral@melaw.ca