Mortgage Enforcement: You Have Options
As a mortgage professional, you know that economic uncertainty goes hand in hand with an increase in the rate of mortgage defaults. The good news is that when it comes to enforcement, mortgage lenders have options.
Ontario law provides powerful remedies to mortgage lenders when a borrower defaults. Mortgage enforcement remedies include appointment of a receiver, foreclosure, judicial sale and sale of the property by power of sale, just to name a few. Knowing that there are options, you and your clients may also have questions:
- If you take possession, should you manage it yourself, appoint a private receiver, or ask the court to appoint a receiver?
- What risks do you take as a lender if you sell the property privately instead of with supervision by the courts?
- If you obtain a judgment against the original borrower for the deficiency left after a sale, is the guarantor still liable?
Each remedy has its advantages and disadvantages. The best option for a lender may vary from one mortgage to the next. We are happy to discuss the options that best respond to our current market in a free thirty-minute consultation.
WHO WE ARE
Loopstra Nixon LLP is a full-service law firm with over forty-five years’ experience serving clients involved in business, finance and litigation. Mortgage enforcement is a key part of our litigation practice. Our team has significant experience in providing time-sensitive and cost-effective strategies to mortgage lenders.
Combining exceptional client care with excellent legal work is our defining hallmark. We listen intently, probe to clarify your exact needs and concerns, and partner with you to ensure complete delivery to your standards and satisfaction. Work is handled by the right person to do the job, to ensure your needs are handled expertly and on budget.
Our fees are sensible. They reflect the scope and nature of your work and are discussed at the outset of a matter.
HOW WE CAN HELP
Sue for Repayment of the Debt
The simplest option may be to sue for repayment of the debt. Not every borrower who defaults on a mortgage is unable to pay. In some cases, a guarantor or even the current owner of a mortgaged property may also be liable for the debt.
Foreclosure
Foreclosure is like an alternative to repayment. The main advantage is that a foreclosure allows the possibility of acquiring a property that is worth more than the debt.
In a foreclosure, the lender becomes the owner of the mortgaged property. If the lender sells the property to a third party, then the lender and any guarantor are fully discharged from their debt under the mortgage. If the proceeds of the sale are not enough to cover the debt, the lender loses the opportunity to due for the deficiency. There is also a risk that the courts may set aside a final owner of foreclosure so that the borrower can redeem the property.
Sale
Most lenders prefer a sale to foreclosure. A sale provides funds to repay the debt without the burdens of ownership. If the proceeds of the sale are not enough to extinguish the debt, the lender can sue those who are liable to pay for the deficiency.
In a judicial sale, the court becomes involved in directing how the sale is carried out. A private sale has the advantage of speed but can expose the lender to liability regarding the conduct of the sale. The judicial sale carries less risk of liability but may take longer to complete.
Before the sale, the lender can seek possession of the property to generate income to reduce the debt, although possession comes with legal responsibilities.
These are just a few of the mortgage enforcement remedies available. If you or your clients would like to discuss any aspect of mortgage enforcement, please contact Michael McWilliams at 416-748-4766 or mmcwilliams@loonix.com to set up a free thirty-minute consultation.