Apr 28, 2020
THE NEW REALITY: PRIVATE MORTGAGE LENDERS’ RIGHTS AND REMEDIES - Part VIII of a Series – Starting the Mortgage Remedy Action
In the last few blogs, I reviewed demand letters in some detail. And in the previous blog HERE I opined that it was not yet the appropriate time for private mortgage lenders to demand mortgage loans that are currently in default - at least, not for the immediate future. I continue to be of the view that compassion and magnanimity should be the rule, not the exception.
But one day in the not too distant future, current restrictions will loosen. While social distancing appears to be the new normal for the foreseeable future, businesses will slowly reopen and the economy will slowly come back to life. Many economic experts are predicting that this may be more of a whimper than a kick start. Nonetheless, I believe that all mortgage lenders need to plan ahead and be prepared. Private mortgage lenders especially should start thinking about how and when they will commencement mortgage recovery proceedings.
When is the time right for private mortgagees to start enforcing their mortgages if a homeowner has defaulted under her or his mortgage during this Covid-19 first phase lock down (likely mid-March to end of May 2020)? And what should that mortgage enforcement look like? Should it differ from the usual procedures we were using in 2019 and early 2020?
First, a few words about mortgage remedies in general. In Ontario, mortgage enforcement is not as restricted as it is in most other provinces. In this province, private mortgage lenders have a wide array of enforcement options available. The Mortgages Act gives statutory rights of recovery and enforcement to mortgage lenders. And the mortgage contract itself (and the common law) also afford parallel rights and remedies to lenders holding mortgage security. But what really sets Ontario apart from many neighbouring jurisdictions is a private mortgagee’s ability to carry out and complete its mortgage remedy process entirely on its own initiative (sometimes called ‘self-help’) without resorting to the Courts or to the Courts’ process.
This is huge. Mortgage lenders in Ontario can demand, issue a notice of sale, seize and sell without getting the Courts involved at all. Or mortgage lenders can take advantage of the Courts' process, if necessary or desirable. And these various remedies may be instituted alone or in conjunction with each other and in any order (basically) and some of these remedies may be skipped altogether. This flexibility in remedy choices speeds up the process and can reduce costs. Conversely, it also allows for unscrupulous lenders to take advantage of the most vulnerable of debtors who are in the throes of losing their homes.
Next post will compare foreclosure and sale remedies; which is often the starting point in the mortgage remedy action following the expiry of the demand. How does it differ from foreclosure? Which (power of sale or foreclosure) ought to be the preferred route?
As always, this blog is intended for information purposes only. It is not legal advice and cannot be relied on as such. Nor is it a substitute for hiring your own legal counsel, who will be an essential member of your mortgage default and mortgage remedy team. And lastly, this blog is just my opinion. I reserve the right to change my mind. And I reserve the right to be wrong.
Be well and stay healthy.