If you can’t make your mortgage payments each month, you are in danger of falling into default with your lender. At that point, the lender has the right to start a legal process that starts with notification of default and can end with the lender taking over the house and evicting you from the premises. If this process is already underway for you, then you should seek the guidance of a real estate attorney; the purpose of this article is to give you an overview of the process and tell you about how HOS Financial can help you out if you live in the York Region of Ontario.

What is a power of sale?

This provision permits lenders to sell your property when you default on your mortgage. The ownership of the property actually shifts once the sale has taken place – and even after your home has been sold, you will still have some obligations to your lender that you have to satisfy. Here are the basics of this process:

• The court orders the sale of the property, and once a buyer executes a purchase contract, the ownership then shifts from your name into his name.
• In some jurisdictions, a realtor may be used. This is a good thing, because a realtor will generally work hard to get the best sale price possible. Check with your attorney to see if you can use a realtor for your property.
• If you sell the house for more than the balance due on the mortgage (plus fees), you get to keep the money. If you don’t make enough money to pay the lender back in full, though, you still owe the balance due.
• Don’t worry about your house being sold quickly for pennies on the dollar. If you don’t feel like the purchase price on the executed contract is going to be what the fair market value of the property is worth, you can request an audit of the process. It is in everyone’s best interest to get as much money for the property as worth.
• If private mortgage insurance (PMI) has been taken out on the property, the lender might make a claim on that policy if the lender cannot get the balance owed out of the sale. In that case, the insurer is likely to come back and sue you for the amount they had to pay to make up the difference between the balance due and the sale price.

How does foreclosure work?

Foreclosure involves the lender requesting and receiving a court order to take over your property. In this situation, the ownership of the property goes right to the lender after the foreclosure has been granted, and the switching of the title of the property constitutes full payment of the balance due on the defaulted mortgage. Here are some differences between foreclosure and power of sale:

• The lender may sell the property more quickly, because it is cheaper for the lender to get some money out of the property and then invest it elsewhere than it is for the lender to have to wait for multiple bids to come in.
• The lender does not have to negotiate with potential buyers, as with a power of sale. Because your debt has been satisfied with the transfer of the title, you have no standing to question the process.
• If the sale of the property after foreclosure yields a profit over the balance due, that money goes to the lender as well. If the sale does not yield the balance due, the lender has to take the loss.

If you are in the initial phases of default and need a way out that does not involve either foreclosure or power of sale, consider HOS Financial. If you’re about to go into default, you can sell your house to us, and then sign a contract as a tenant/borrower, and over the term of your lease purchase agreement, you can rebuild your credit while putting some of your monthly payments aside into savings for a down payment. Once your credit is up where it needs to be, you take out a new loan and start your mortgage over. We have helped many people avoid foreclosure and power of sale in the York Region of Ontario and look forward to working with you!