Power of Sale in Canada — What Are Home Owners’ Options?
No homeowner ever chooses to see their home sold out from under them via a Power of Sale. In fact, many homeowners feel a sense of rising panic when they receive a letter advising them of a pending Power of Sale — and more panic when they find few or no mortgage professionals able to get them a new sub-prime loan to replace the existing one. Is losing their home really the only option?
Fortunately, the answer is no. Thanks to rising numbers of homes being sold — many would say unfairly — by banks and lenders via Power of Sale, new options are now available that allow many homeowners to save their homes. First, however, it’s important to understand exactly what a Power of Sale is.
Understanding Power of Sale
Traditionally, when a bank or lender took away a home from the owner due to past-due mortgages, this was called “foreclosure.” Many people still think of this process as “foreclosure,” though the term is no longer accurate in today’s market.
Nowadays, a process known as Power of Sale has largely replaced the older foreclosure system. This is because foreclosures required the lender to sue the borrower in court. Only a court could remove the borrower’s claim to the property, which was necessary before the lender could sell the property.
Since court cases tend to be drawn out and often very expensive, lenders have restructured mortgage deals so that no court case is necessary. With this kind of mortgage, the process of issuing the loan sees a “deed of trust” drawn up for the property and transferred in turn to a trustee. Since this trustee, not the homeowner, holds the deed of trust, they can sell the property without the intervention of a court. Of course, the trustee is limited in this power by contractual obligations.
With the Power of Sale system, the court is replaced by a trustee. If the lender informs the trustee that the homeowner — the borrower — is in default on their loan payments, the trustee exercises their “Power of Sale” and sells off the home, recovering the lender’s money.
Power of Sale in Canada can happen very fast — often the home is sold in a period of weeks.
Options For Homeowners Facing Power of Sale in Canada
Since Power of Sale can proceed rapidly, any homeowner who has received a letter threatening Power of Sale should immediately contact their lender.
The reason for this is, even the “streamlined” Power of Sale process is still expensive and time consuming for the lender compared with a normal loan. Therefore, most lenders would rather recover their money via normal loan payments than via Power of Sale. Power of Sale is a last resort option, when they feel they cannot recover their money otherwise.
Therefore, if the homeowner’s missed or late payments were the result of a one time, rare occurrence (such as an injury, illness, or lost job) then the lender may be willing to find an alternative option that does not involve Power of Sale. Of all available options, working with the lender to come up with an alternative payment plan is the best possible outcome for both homeowner and lender, and may be sufficient to prevent Power of Sale.
In some cases this is not possible. The lender may not be able or willing to worth with the homeowner — such as in the cases of “orphaned mortgages,” where the lender is simply not doing business in Canada anymore.
Fortunately, the borrower can still hold on to their property even if the lender is not willing to work with them. The borrower simply needs alternate financing. Here, the local bank or mortgage professional is the next stop. Traditional financing will provide the best rates, if the borrower is eligible.
For Homeowners Not Eligible For Traditional Financing
Not all borrowers facing Power of Sale are eligible for traditional financing. In this case, programs such as the HOS Financial Refinance Program are available to allow even sub-prime homeowners to keep their homes.
The HOS Financial Refinance Program locates alternative financing sources for homeowners, so they can stay in their homes and stop a Power of Sale. Just as important, the Refinance Program also provides credit counseling so they never need face a Power of Sale again.
The reason this is so important is that most homeowners facing Power of Sale do so because their credit is too poor to find replacement financing from a traditional lender. Without repairing their credit score, this risk is ever-present, always hanging over their heads.
The HOS Financial Refinance Program therefore doesn’t just allow homeowners facing Power of Sale to keep their homes, it also helps them restore their credit and never worry about it happening again.
Power of Sale proceeds very quickly. Therefore, homeowners who meet the two main criteria for the HOS Financial Refinance Program — at least 10% equity in their houses and a steady source of income — should contact HOS Financial for pre-approval immediately. This may be the difference between losing and keeping their homes.