If you are one of the unfortunate Canadians who have lost a job, became ill or suffered some other sort of financial setback, making or continuing to make your monthly mortgage payment can be a real difficulty. The problem is that if you miss your payment, even just once, your lender has the right to declare you in default. Have you already received written notification that you are in default? If so, you need to speak with a real estate attorney to help shield your rights in the process.
The content of this article should not be construed as legal advice. Instead, it simply helps to give you a basic look at how foreclosure and power of sale both work. They both can lead to you losing your home. Do you live in the Kitchener Region of Ontario? Is it possible that you will default on your mortgage? HOS Financial has solutions for you, even if the legal process is already underway.
What takes place in the foreclosure process?
When you default on your mortgage, the lender can initiate proceedings that lead to the foreclosure of your home. 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. This means that foreclosure actually has fewer risks for you than the power of sale process does, although both will leave you without a home and without credit.
Here are some of the basics of this process:
- Since the lender owns the property now, the lender is entitled sell the property as quickly as the lender chooses to do so, with no price restrictions. The borrower’s debt is paid in full no matter how much (or little) the sale brings in.
- If the sale of the house yields more than the balance due of the loan (including fees), the lender gets to keep those profits.
- The lender does not have to enter into negotiations with possible buyers – which is the most significant 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.
How does the “power of sale” process differ from the foreclosure process?
The “power of sale” process will result in you losing your home if it goes the full distance. The main difference between power of sale and foreclosure has to do with the way the transfer of ownership happens. With a power of sale, the transfer happens when the property sells, when it goes directly from the borrower in default to a new buyer. Another difference is the defaulted borrower can still owe money after the house is sold, depending on how the sale goes.
Here’s an overview of how a power of sale works:
- If the home sells for more than the balance due (including fees), the borrower may be entitled to receive money after all costs and legal fees associated with selling the property are accounted for. If there is still a balance due, though, the borrower has to come up with the Shortfall on sale.
- 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.
- The bank never appears as the owner on the title. The property ownership goes right from the defaulted borrower to the purchaser of the home.
- Did the mortgage have Mortgage Insurance such as CMHC? If so, the insurer can go after the borrower if the lender files a claim on that insurance policy.
- 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.
Need a way out of Foreclosure or Power of Sale? HOS Financial can help!!!
Have you already received written notice of default? Consider the HOS Financial Lease BuyBack program. You sell your home to HOS Financial and you use the proceeds to pay off your Mortgage which is in default. Then, you enter into a lease purchase contract with HOS Financial. You stay in your own home and pay a lease payment each month. Some of that lease goes into a savings pool for a down payment on your next mortgage when you buy your home back. 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 shambles.
If you’re curious about how we can help people in the Kitchener Region, give HOS Financial a call today!