One of the scariest experiences you can go through is the worry you may lose your family home. If you miss even one mortgage payment, lenders see that as a Default and, depending on your payment history, it may be enough to start a legal process which ends with your family on the street, homeless.

Has your lender already notified you in writing that you are in default? If so, it’s time to talk to a real estate attorney to make sure all your rights are upheld. This article is not legal advice but instead is an overview of the two different legal processes that can lead to the loss of your most prized possession – Foreclosure and power of sale.

Do you live in the Barrie Region of Ontario? Are you in danger of Mortgage default?

HOS Financial has solutions for you, even if the legal process is already underway.

How does Foreclosure work?

When most people think about losing their homes to a bank, Foreclosure is what they think of first. This involves a legal process whereby a judge finds that Foreclosure is necessary and, at that point, ownership of the house changes from the borrower to the bank. Your debt is satisfied, and the bank can take no further action against you. Here are some of the basics of this process:

• Because the lender owns the property now, the lender can sell the property as quickly as the lender chooses to do so – at any price. The borrower’s debt is paid in full either way.
• The lender is not required to enter into negotiations with possible buyers – which is a big difference in comparison to a power of sale. The lender assumes the risk of having the sale price come in less than the owed balance.
• If the sale of the house brings in more than what the borrower owed on the balance of the loan (including fees), the lender gets to keep those profits.

What is a power of sale?

The “power of sale” process ends the same way as Foreclosure, in that the defaulted borrower ends up losing his or her house. The main difference in a Power of Sale process has to do with the way the transfer of ownership happens. With a power of sale, the transfer of ownership happens at the time of sale, when ownership goes directly from the borrower to a buyer. Another difference in a Power of Sale is the borrower can end up on the hook for more money afterward, depending on how the sale goes.

Here’s an overview of how a Power of Sale works:

• The bank never shows up as the owner on the title. The property ownership goes right from the borrower to the purchaser at the time of Sale.

• In many cases, you get to use a realtor (or even have to use one). This is good for the borrower, because it makes a higher sale price more likely.
• If the home sells for more than the balance due (including fees), the borrower gets the difference. If there is still a balance due, though, the borrower has to make good on the difference.
• If the borrower feels like the process has been unfair – with regard to the commission of the sale – he or she can ask for an audit of the process.
• Did the mortgage have Mortgage Default Insurance? If so, the insurer can go after the borrower if the lender files a claim on that insurance policy.

What if have already defaulted and a process has been started against you?

There are limited Options available for Consumers who are in or about to be in a Power of Sale or Foreclosure. Tightening Mortgage guidelines limit access consumers have to equity in their home to solve problems when they are in financial trouble.

Consider HOS Financial’s Home Owner Soon rent to own program to escape Power of Sale or Foreclosure. You sell your home to HOS Financial and enter into a Buy Back agreement to buy your home back. HOS Financial uses up to 90% of your home’s value to pay off Existing Mortgages, Liens, Judgments, Consumer Debt, CRA, Property Tax arrears and more. You keep a minimum of 10% of the Home’s Equity which is returned to you when you buy back your home. You stay in your own home, and you pay rent each month. 20% of all payments goes into an Option Credits account which is added to the 10% Equity you preserved in the beginning to form a larger down payment when you exercise the Option to buy the house at the end of the Rent to Own Buy Back term. The total Down Payment when you buy your home back is estimated at 20% of the Mortgage amount when you exit! Once the lease is up, you go to the bank and start a new mortgage. Your credit report doesn’t show anything about a Power of Sale or a Foreclosure – which means your financial life isn’t in ruins. If you’re curious about how we can help people in the Barrie Region, give us a call today!