Is your lender enforcing your mortgage? Or are you a lender enforcing a mortgage?
Our firm acts for both borrowers and lenders in mortgage enforcement proceedings. If you are enforcing a mortgage or being faced with mortgage enforcement, this article is for you.
What is a Mortgage?
A mortgage is two things: (1) a promise to pay; and (2) a security against property which gives the lender the right to take the property and liquidate it in case the borrower fails to pay.
Generally, a mortgage is registered against title of a property, which signifies to the public that the owner of the property is indebted to the lender for a specific sum.
Mortgages usually have a monthly payment obligation and maturity date. Failure to make payment or pay off the mortgage by the maturity date results in a default.
What Happens if there is a Default?
When a default happens, the lender’s right to liquidate its security, the property, is triggered.
Meaning, the lender can take self-help remedy steps such as taking possession. The standard remedy for lenders in Ontario is to conduct a power of sale. The reason being is that it is the most efficient way of realizing on the security.
What is a Power of Sale?
A power of sale is the primary self-remedy a lender uses to recover the monies the borrower owes. A power of sale is generally commenced by way of sending a Notice of Sale. It is also accompanied by a legal proceeding seeking possession.
Once the lender takes possession, it will sell the property and apply the proceeds of the sale to the indebtedness owed to the lender.
A lender must take care when selling a property and has a duty to account to the borrower.
Meaning, if there are monies left over after the lender is made whole, those monies go to the borrower.
How long do Mortgage Enforcements take?
It depends on the jurisdiction. It can take from a few months to a couple of years.