If mortgage payments are not made, a mortgage lender in Ontario recover the money owed under their mortgage and can take possession of a property using the power of sale or the foreclosure approach. Though these two processes are very different from each other, many homeowners are not aware of their diverse outcomes.
As a homeowner, you should get legal advice on your rights under either of the two processes in case you receive a legal notice from your lender. This is crucial as the amount received, and the timelines for the methods are massively different from each other.
Power of sale
A power of sale is a procedure under which the mortgage lender gives a written notice to its borrower that the mortgaged property will be re-possessed and sold if the mortgage is not paid off. The lender may follow up this notice with legal proceedings to evict the occupants from the property and sell it if the borrower remains in default.
In a power of sale the property is sold at market value usually through a multiple listing service. The lender takes the amount owing on its mortgage including taxes and penalties from the sale proceeds. After the lender takes his share, all remaining sale proceeds go to the party next in interest, with any surplus from the sale eventually passing to the borrower.
In the majority of the cases, both parties would prefer standard debt repayment over this process of recovering debts. As compared to the foreclosure process, the power of sale is a quicker process with less litigation involved. Most power of sales cases are completed in a six-month period while foreclosure can take more than a year.
Foreclosure is very different from the Power of Sales process. In foreclosure, the lender gets the title to the property and becomes the owner of the property, with no obligation to sell the property or to account to the borrower. Foreclosure cases take longer to resolve and have a more complex procedure and give the borrower the right to ask for a judicial sale or the opportunity to redeem the mortgage. The property’s title passes to the lender after the completion of the foreclosure process. The borrower has no right to receive any sale proceeds from the property in the future.
Skilled legal representation with personalized solution and advice is recommended for resolving power of sale and foreclosure situations.