Power of sale (also referred to as notice of sale) can be a scary experience. Power of sale is the actionable response from a mortgage bank/lender with regard to mortgage arrears, non-payment or habitual late/missed payments by the borrower/borrowers. Each bank/lender will have their own clauses in their original contract outlining their power of sale terms (or ‘default’ terms). Power of sale is not the first step in arrears or non-payment; in fact the banks very rarely want to resort to this immediately given such scenarios. Power of sale proceedings can be costly and involve legal expenses on part of the bank, but those legal expenses are then relayed to you as the borrower as part of the power of sale. These costs pile up quickly, but it’s important to note that the bank is not out to get your money. They do not like ‘bad loans’ as they refer to it in their portfolio so if there is a way to rectify the situation they will try. Yes you may get calls from their accounts receivable department, and it may be stressful and a nuisance, but they are trying to work with you to bring the mortgage back into good standing as a way of avoiding notice of sale proceedings.
Ultimately, if the bank is successful in their power of sale proceeding, they will take possession of your home. Once possession is taken, they will sell your home at lowered price necessary for a quick sale, but enough to recover their funds. You will not only be evicted from your own home, but you will certainly lose money/equity in the process and this will be a very disheartening experience.
The only way to avoid a power of sale is to arrange payment with the bank (however that might be) OR replace the existing mortgage with a private mortgage OR arrange a sale under your own terms/control to avoid losing equity. Of course, the sale of your home is not an easy, over-night decision to make and should be considered under the circumstances of ability to re-pay the mortgage in a timely manner. Therefore, either bringing the mortgage back into good standing OR paying out the mortgage should always be the first option. It’s almost always a very complex situation, and each situation is very much a case by case so it’s crucial to talk to an expert brokerage while you have time on your side. Arranging new financing can take anywhere from 2-3 weeks, and usually the bank will give you a 30 day notice before moving forward with the next steps… so time is sensitive!
If you’re facing a power of sale, call us immediately upon receiving the ‘notice of sale’ in the mail so we can utilize the time we need to help you.