There are times when making your mortgage payment each month becomes a real financial struggle. 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 shield your rights in the process.

The content of this article should not be construed as legal advice. It simply gives 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 London 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.

How does power of sale work?

The “power of sale” process ultimately leads from default to the loss of your home. 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 to the buyer. Another difference is that the 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 gets the difference. This is very rare as Legal Fees and Other costs often find a way to take away any excess funds on sale of your home. However, if there is still a balance due, though, the borrower has to make good on the difference.
• The bank never appears as the owner on the title. The property ownership goes right from the borrower in default to the purchaser of the home.

• Did the mortgage have Mortgage Insurance such as Genworth Mortgage Insureance? 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.
• 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.

How is the foreclosure process different from the power of sale?

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.

What if the bank has already notified you that you are in default?

Have you already received written notice of default? Consider the HOS Financial Lease Buyback/rent to own program.

You sell your home to HOS Financial – and then you use the proceeds to pay off your Mortgage balance. Then, you start a lease purchase contract with HOS Financial. You stay in your own home, and you pay rent/lease each month. Some of that rent (20%) goes into a savings pool to be added to yoru original equity when you started the program. This Original Equity plus 20% of all Lease Payments become your final down payment when you execute the forward mortgage agreement to 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 ruins.

If you’re curious about how we can help people in the London Region, give HOS Financial a call today!