A power of sale (foreclosure) is when the bank or lending institution which holds your mortgage, takes the necessary steps to repossess you home for defaulting on the regular scheduled payments. It is not within normal practice for a bank to proceed with a power of sale (foreclosure) for missing one scheduled payment, rather it is the result of habitually missing payments throughout the regular term of the mortgage, or missing 2-3 consecutive payments in a row. In most cases, it isn’t common for a bank to issue a notice of sale until the maturity of the mortgage, at which point it is in their discretion to either renew your existing mortgage, or request a full payout. If your mortgage is mature and out of term bringing the mortgage back into good standing is usually no longer an option.
Within the time frame (usually 30 days), it should be an absolute priority to get in touch with a mortgage broker to seek out alternatives for financing. Often times, we have clients come to us days/weeks after being served the notice of sale. This can be a stressful time for anyone and at first it may seem easier to give up than seek out a solution.
It’s important to remember that there is a lot more work to do for a complicated deal such as this, and without sufficient time it may not be possible to meet the deadline. For all foreclosure deals that have come our way, Canadian Mortgage Services have been able to help clients in Brampton, Mississauga & Milton find a solution in nearly 95% of cases. Though the solutions themselves may not be cheap, the ultimatum is between paying more to keep your home (and sell at your own will if need be) vs. letting the bank repossess your home which is a much greater loss both financially and emotionally.
Contact us today for professional guidance with your Notice of Sale. Serving Brampton, Mississauga & Surrounding areas.
Q: What is a power of sale?
A: In the simplest terms, a power of sale is when the mortgagee (lender) is given the remedial process to liquidate the collateral (real estate) in order to retrieve the money that was lent. This occurs when the borrowers are in default of payments greater than 30+ days.
Q: Why won’t they give me more time?
A: Banks and other lenders are actually not interested in a Power of sale as their first choice. In fact, many lenders will work with the mortgagor/s (borrowers) in order to bring the mortgage bank into good standing. This may include a payment arrangement over a period of time that is feasible to the borrowers and acceptable to the lender. If they have chosen to take this path, it usually means that they have already exhausted other options. In other cases, they may not feel comfortable with providing extensions on late payments because they do not believe that the borrower would be able to “dig themselves out”.
Q: Do all types of lenders do this?
A: Yes, all lenders are given this tool as a way to get their money back. It is a necessary clause that allows banks and other lenders to feel comfortable lending in mortgages, knowing that they have a process to get their money back if the borrowers default on the agreed terms
Q: Is there anything I can do to stop a power of sale?
A: The best thing to do when you are behind on any mortgage payment is to contact your bank and let them know that you are aware of the missed payment and offer a solution to bring the mortgage back into good standing. This initiative shows them a good faith effort on your part and will likely yield a positive response. If you believe you will not be able to bring the mortgage back into good standing then it’s best to speak with a mortgage broker, in order to figure out a strategy to either bring the mortgage back into good standing by other means or to pay out the existing lender in full (clean slate). In fact, when a mortgage professional steps into the picture, the existing lender will likely be more cooperative as they can see that you are taking active steps to remedy the situation. Remember, that the banks are not in the industry to seize property and sell them, only to get their money back. They are in the industry to lend money and make a return through repayments by the borrowers.
Q: What if I give in and just let power of sale happen, will I lose all my equity?
A: Depending on your current loan value, which is the amount owing on your mortgage vs. the value of your home, you could be in a position to lose all of your equity. However, if you have lots of equity in the home, then this would be less likely. Although you are in default, the bank cannot punish you beyond the agreed penalties outlined in the commitment schedules (late fees, penalties, admin charges, etc.). in fact, they can’t even undersell your home to spite you because they have to sell the home at a fair market value.
Having said that, you worked very hard to own your home, including the initial down payment and principal payments made over the years. You should never take a passive approach or sit back, while the bank steers the ship. Take action because although a power of sale is an expensive road to travel, it has far greater tolls if you don’t try to take the earliest exit possible.