Chapter 21: Mortgage Remedies Flashcards
What constitutes default by the Borrower?
Failure to perform his or her mortgage obligations, including any of the covenants contained in the Standard Charge Terms.
What process is the most common remedy used by Lenders in Ontario when a Borrower defaults on his or her mortgage obligations?
The Power of Sale process.
What Act outlines the process that must be followed under a Power of Sale?
The Mortgages Act, R.S.O. 1990, c.M.40.
How long after a Borrower defaults on his or her mortgage payment can a Lender begin the Power of Sale process?
15 days.
Describe, in your own words, the Power of Sale process.
(5)
The Borrower defaults
The Lender serves notice
The Borrower has a redemption period
The Lender takes possession of the property
The Lender sells the property
How does a Foreclosure differ from a Power of Sale?
In a Power of Sale the Borrower receives any profit from the sale and is liable for any shortfall. In a Foreclosure the Borrower’s rights and obligations to the property are terminated.
What provinces currently use a Power of Sale process?
(4)
Newfoundland and Labrador
New Brunswick
Prince Edward Island, and
Ontario
What documents must a Lender provide a Realtor when selling a property under Power of Sale?
The Lender must provide the Realtor with a Certificate of Power of Sale, proving that the Lender has the legal right to sell the property. A schedule must also be attached to the Agreement of Purchase and Sale, entitled the Seller Selling Under Power of Sale.
List the order in which proceeds of a sale under a Power of Sale are distributed.
(6)
In payment of all expenses involved in the sale of the property, including the Realtor’s fee, legal fees, etc.
In payment of all interest and costs associated with the mortgage involved in the Power of Sale
In payment of the principal balance outstanding on the mortgage involved in the Power of Sale
In payment to any additional encumbrancers such as mortgage holders and others who had an interest in the property
Payment of rental deposits made by any tenants, if applicable
Any monies remaining must be paid to the mortgagor
What is the difference between a judicial sale and a foreclosure?
A judicial sale and foreclosure are similar in nature. The main difference between a judicial sale and a foreclosure is that the courts are handling the sale in a judicial sale, whereas in a foreclosure, the lender obtains ownership of the property and sells it.
What provinces use the foreclosure process?
(6)
Alberta
British Columbia
Manitoba
Nova Scotia
Quebec, and
Saskatchewan
What is a quit claim?
A transfer by the borrower of ownership to the lender in exchange for releasing the borrower from any further liability.
What is the difference between an appointment of a receiver and an assignment of rents?
Appointment of a Receiver: Typically used in commercial properties where there is business or rental income generated by the property, the lender applies to the Court for appointment of a receiver. Once appointed, the receiver will collect and administer the income generated by the commercial property, paying expenses, including the mortgage payments.
Assignment of rents: A clause written into the Standard Charge Terms, allows the lender to collect rent form tenants of the mortgage property, while the mortgage is in default
When can an action on the covenant be commenced?
This refers to a lender’s right to immediately sue a borrower for the missed mortgage payment
