What is a Power of Sale Foreclosure?
When you have not made all the payments that are
due on a mortgage a lender will usually start a foreclosure
process on your property. This is because if you are paying
your mortgage your lender is losing money so they are often very
quick to start foreclosure proceedings.
The Power of Sale Foreclosure is the most commonly used method
by which a lender, or Mortgagee will seek to gain possession of
the mortgaged property with a view to selling it and regaining
the total money owed on the mortgage.
The Power of Sale Foreclosure is made possible by the rights
contained within the mortgage document which is signed by the
borrower. In some Canadian provinces the Mortgages Act also
provides the lender with the same rights to foreclose on a
property where there is a default in mortgage payments.
Whilst no type of
foreclosure
is pleasant or cheap for either the mortgagee or the borrower
(the mortgagor), it is one of the fairest and most inexpensive
methods that can be used.
The Power of Sale Foreclosure will allow the lender to sell the
property but any surplus from the sale of the property, less the
expenses will go to the mortgagor and not the lender. The lender
also has a legal obligation to obtain the best possible value
for the property. This is an important difference. Other
foreclosure methods such as short sales and Judicial Sale Method
do not put this obligation onto the lender.
Unfortunately if the sale of the property does not clear the
monies due under the mortgage and any other liens and
sub-mortgages on the property then the lender has the legal
right to sue the borrower for the remaining monies due. As to
whether this is a route that would be particularly profitable is
a moot point but it is a situation that should be considered and
anticipated.
Foreclosure is instigated by the lender sending a formal notice
for foreclosure to the borrower once the arrears have reached an
unacceptable level. There are some legal complexities associated
with obtaining possession of the house but the whole foreclosure
process using the Power of Sale Foreclosure method usually lasts
from 3 – 5 months.
Lenders like this foreclosure method because it is fast and
cheap which means that you may also lose your house very quickly
if you fall into arrears so you should do everything possible to
either clear your arrears, make a financial arrangement with
your lender or sell your house yourself. You might consider
doing up your house yourself in order to increase its value if
you think that foreclosure is imminent. In this way you might
even come out of the whole stressful process with a profit.
However you look at it, foreclosure, even a Power of Sale
Foreclosure, is not pleasant, so seek financial and legal advice
as soon as you have financial problems and cannot pay your
mortgage.
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