Are you falling behind on your bills? One bill that you definitely want to pay at all costs is your mortgage payment. Even missing one can put you at risk of going into default on your loan. Once you’re in default, the lender can begin the legal process of taking your home away from you and selling it for the proceeds. If you have already received notice of default, then you need to call a real estate attorney to find out about your rights in the process. Many families look at Power of Sale or Foreclosure as a shameful thing and bury their “head in the sand”. This is a mistake many make thinking they have time or the problem will go away. Time is of the essence and these problems do not go away! The purpose of this article is to go through the two ways in which a Lender can take away your home – foreclosure and power of sale. If you live in the Peel Region of Ontario, call HOS Financial. We have been helping families escape Power of Sale or Foreclosure for over 15 Years – even if the default process has already started.

How does foreclosure work?

Foreclosure is the most commonly used method for a lender to take over a property which has gone into mortgage default. When this happens, your ownership as the borrower ends as the judge has issued the foreclosure judgment. At that point, the lender owns the house and your debt is considered satisfied in full.

Here are some things you need to know about the foreclosure process:

  • The lender does not have to list the property with a realtor unless the lender chooses to do so. The lender may accept any price that he/she sees fit because the lender’s name is on the title now.
  • The lender does not have to negotiate with potential buyers, as with a power of sale. Because the title transfer happened at the foreclosure judgment, the borrower has no standing to request that the lender get fair market value out of the sale.
  • The lender does risk losing money on the sale. However, if the sale brings in more than the balance due, the lender gets to hold onto the profits.

What is a power of sale?

The process known as “power of sale” differs somewhat from the foreclosure process. The primary differences have to do with the timing of the transfer of ownership – in the case of Power of Sale, it takes place at the time of sale instead of at the foreclosure hearing. In a Power of Sale, the borrower could end up with obligations after the sale, depending on the sale price.

Here’s an overview of how a power of sale works:

  • The lender will never appear on the title as the owner. Once the sale contract goes through, the title transfers right from the defaulted borrower to the buyer.
  • Your specific jurisdiction may require that you use a realtor. This is good news for the borrower because realtors will usually work for higher selling prices.
  • If the sale price is more than the balance due with added legal and Sale fees,  the borrower gets to keep the excess. However, if the sale price doesn’t cover the full balance owing,  then the borrower still owes the difference.
  • If the borrower thinks the sale price for the house did not reflect fair market value, then he/she can ask for an audit of the process. The borrower is on the hook if the sale price does not cover the full balance owing, so it makes sense that the borrower would want to get the best deal possible on the property.
  • If the mortgage came with PMI (private mortgage insurance)such as CMHC and the lender puts in a claim on that policy to get the difference between the balance owing and the sale proceeds, the borrower might become the target of a lawsuit from the insurance company.

If you’re reading this article, you might be in the throes of mortgage default right now. There is a way out that does not involve either foreclosure or power of sale – you can take advantage of our rent to own program. You sell your home to an  HOS Financial Investor with an agreement to buy it back at a pre-determined time and price in the future. The money from the sale satisfies your balance due and pays other debts, the collection calls stop, your family stays in your own home and HOS Financial will work with you to get you Bank ready again in the future. During the Rent to Own program, you are converted from an Owner to a Tenant back to an Owner. During the Rent to Own program you pay a lease payment each month. Some of this Lease payment ( 20%) goes into Option Credits (Savings) which is added to your Initial Equity to form your eventual down payment when you buy the home back at the end. After the lease term is over, you go to a bank and take out a new mortgage. You get to keep your home, and you don’t have a foreclosure or power of sale on your credit report. Throughout the Peel Region of Ontario, we have helped many families avoid Power of Sale – and we can help you too.

If you are in the initial phases of Mortgage default and need help escaping foreclosure or power of sale, consider HOS Financial. In addition to saving homes, HOS Financial will work with you to rebuild your credit to become bank ready in the future. We have helped many families avoid foreclosure and power of sale in the Peel Region of Ontario and look forward to working with you!