If you own a home but are not familiar with real estate law, the differences between Power of Sale and Foreclosure can be confusing. If you are also in financial difficulty or otherwise facing the possibilities of Foreclosure or Power of Sale proceedings, it’s very important to know which one applies to your situation. Foreclosure vs. Power of Sale can mean the difference between having a few months to leave your home, and having a few weeks — or less.
What is a Power of Sale?
Under the Power of Sale system, in other words, the role that the courts used to play has been largely replaced by the trustee. All the lender needs to do is inform the trustee that the borrower (the homeowner) has defaulted on their mortgage. The trustee then uses the Power of Sale to sell off the home, and recover the lender’s money.
In short, a Power of Sale can be very fast. Often, the home may be sold within weeks.
What is a Foreclosure?
A Foreclosure is a drawn-out, painful, and costly process. Not just for the homeowner, either. Lenders almost invariably lose money on Foreclosures, simply due to the inefficiency of going through the court system. This is because any Foreclosure requires the lender to sue the homeowner in court, and wait for the court to issue a judgement turning the home over to the lender. In fact, the name “Foreclosure” comes from the legal process of “foreclosing” on the property owner’s right to sell the property in order to make good on the mortgage.
As one might imagine, Foreclosures can take up to a year or more. To avoid this problem, a number of years ago lenders began restructuring their mortgage contracts to eliminate the court process in the event they needed to repossess the home. In this kind of mortgage, when the loan is issued a “deed of trust” is drawn up for the home. This deed is then transferred to a trustee.
The trustee holds the deed of trust, not the homeowner. As long as they do this, the trustee has the right to sell off the property — they have the Power of Sale. They can also sell the property without needing the intervention of the courts, though there are certain contractual limitations on when they can do this.
Understanding Power of Sale vs Foreclosure
Power of Sale
No bank, and certainly no borrower wants to go through any kind of foreclosure proceedings. This means whatever happens, you can often work out an alternate payment schedule with your bank. If this doesn’t happen, the most common remedy in many provinces — notably Ontario, Newfoundland and Labrador, New Brunswick, and Prince Edward Island — is Power of Sale.
Foreclosure vs power of sale
Power of Sale lets your lender sell your house without going through the courts, at least initially. As a result, the process is much faster. In some cases the Power of Sale can happen within weeks, but you will generally have a 35 day redemption period. This means you will have 35 days after being served notice to pay all your debts (including incurred fees) and get thing back on track. If you do this, you will be able to keep your home.
Otherwise, the lender will go to the trustee, and you will almost certainly be evicted.
The main difference between Power of Sale vs. Foreclosure is that the latter heavily involves the court system. This means it is much slower, foreclosures can easily take 6-10 months. Foreclosures are more common in Nova Scotia, Saskatchewan, Manitoba, Quebec, Alberta, and British Columbia.
If you are facing foreclosure instead of Power of Sale, it will be worth your while to retain an attorney. Foreclosure proceedings can give you a much longer redemption period to pay back the lender (6 months or more) and in the worst case the delays involved in the court system can at least give you a few months to put your finances in order.
When a homeowner is past-due on their mortgage payments, they tend to fear “foreclosure.” In today’s market, many banks and lenders do not use a foreclosure to take away the homes of homeowners who are in arrears. Instead, the process is called Power of Sale, and it is different from Foreclosure in a few key ways.
What Does a Power of Sale Mean For Me?
The fact is that no homeowner chooses to have their home sold off via Power of Sale. Many homeowners, in fact, feel panicked when they receive the letter informing them of an impending Power of Sale. This panic only increases when they discover that most mortgage professionals cannot get them a new sub-prime loan to take the place of the old one. Does this mean that they must accept the Power of Sale and lose their home?
Fortunately, there are other options available. First, it may be possible to stop the Power of Sale by working directly with the lender.
A homeowner who receives a Power of Sale should not sit back and wait. They should contact the lender immediately. The reason is that lenders are not in the business of owning and selling homes — they are in the business of collecting mortgage payments. As a result almost any lender would rather avoid the still time consuming and expensive Power of Sale process if they could collect their money via normal payments. It may be more streamlined than a Foreclosure, but Power of Sale is still a last resort.
Therefore, for homeowners who missed their payments due to rare or one time occurrences, for example job loss or injury, lenders are often willing to work out an alternative payment plan. This represents the best possible outcome for both homeowner and lender.
Not all lenders are able or willing to work out an alternate plan, however. In this case the homeowner has two choices: lose their home, or find a new source of financing.
Alternate financing for someone facing a Power of Sale generally means something other than a traditional mortgage. While traditional mortgages provide the best rates to those who are eligible, homeowners facing Power of Sale are generally not eligible.
How to STOP Power of Sale Foreclosure
We are finding many lenders are recalling mortgage loans due to late or missed payments, low credit scores, or sub primed lenders who are simply not in the mortgage business in Canada any more (orphaned mortgages) such as GE Money, Citi Financial, Wells Fargo, N-Brook, and Accredited leading to a Power of Sale Foreclosure. power of sale foreclosure (What is Power of Sale)
Mortgage professionals are finding it more and more difficult to find a replacement sub-prime lender for clients who face these unfortunate situations. Home Owner Soon specializes in helping clients find a way to pay their existing lender WITHOUT selling their home.
Power of Sale Foreclosure Guidelines
When clients find themselves in situations where a Lender is not renewing their mortgage…they often end up facing Power of Sale Foreclosure. Why? Because there are just aren’t many options for clients who are facing an Orphaned mortgage and they are still considered a “Sub Prime” client. Their Bank wants their Mortgage paid off and there are very few options for clients when they face this demand but have credit challenges…hence…many lead to Power or Sale or Foreclosure.
How Home Owner Soon Solves the Problem
For borrowers who cannot get a traditional loan, the Home Owner Soon Refinance Buy-Back program allows them to stop Power of Sale and keep their homes — no matter what their credit may look like.
The Refinance Buy-Back Program finds them an alternative source of financing, which satisfies the lender and stops Power of Sale in its tracks. Then, the Program gives them the credit mentoring they need to restore their damaged credit and become eligible for a traditional mortgage again.
The fact is, stopping the Power of Sale is not sufficient. Only by repairing their credit can homeowners prevent themselves from facing this same situation again.
If you are a homeowner facing Power of Sale, be aware that you need to act quickly. Power of Sale is a speedy process. Contact HOS Financial immediately to see if you qualify for the Refinance Buy-Back Program — and don’t worry, HOS Financial accepts homeowners with bad or no credit.
Our Refinance Buy Back Model allows you to:
Stay in your home and NOT Sell
Allows you to Rebuild your credit standing
Access up to 90% of your home equity to Pay off Bills…Pay Property Tax Arrears…Pay Revenue Canada arrears…consolidate your debts.
Escape Power of Sale or Foreclosure ….re-finance buy backs suits any home with a minimum of 10% equity.
To qualify for our Refinance Buyback program basically you need a secure Income and 10% Equity in your Home. We are not concerned about your Current Credit Rating as we will mentor you back to good Credit Health!
Stop the drama of eviction, the humiliation and loss of respect by losing your home…there is no need to see your personal belongings moved out into the streets while your wife and kids are in shock!!! Stop Power of Sale Foreclosure Today!