When a borrower fails to pay his or her lender, the lender can take legal action against the borrower to recover the debt. Most banks and other financial institutions will give notice of power of sale after the borrower goes into default when paying his or her mortgage. The process that a lender commences to recover its loss is called power of sale.
The power of sale is a process which gives a lender authority to take possession and sell the house if the borrower fails to bring the mortgage up to date (ie. redeem the mortgage). In this procedure, ownership changes hands after the power of sale is complete to a new owner. The proceeds of the sale then are used to pay off the mortgage which is in default.
• Ownership of the asset does not go to anyone until the power of sale process has been followed and the house has been sold
• The lender can use a realtor to sell the house.
• If by selling the house, the lender can raise more money than the borrower owes. In this case, the extra money goes to the borrower. If the lender raises less than the amount owed by the borrower, then that the borrower is liable for the difference.
• When the mortgage has been insured, then the lender is able to claim a loss, and the insurer will have to pay the lender. Then an insurer can take legal action against the homeowner to recover the cost of the claim.
• A power of sale can happen as a result of different unfortunate events. A borrower may have lost his/her job and been unable to find another job.
• Another reason, power of sale can happen is when the borrower faces personal challenges like divorce, and are unable to make their monthly payments to the lender.
• Health issues that restrict a person from working are another reason why the borrower may not be able to make their payments to the lender.
• In the unfortunate event, of the borrower dying and if the beneficiaries are unable to handle the payment on the property, and if there is no life insurance.
• Failure of a business could also be a reason why payments can’t be met.
The first thing to do is thoroughly read any document sent to you by the lender’s lawyer. Keep in mind that your lender just wants to be paid, so instead of avoiding calls you need to call the lender and tell him that you are trying to get money to them. Consider talking to a lawyer and taking their advice. Some people have stopped the power of sale in Ottawa by coming to a mutual acceptable arrangement to pay the arrears.
Another option is to get a private second mortgage through a mortgage broker so that the arrears can be paid and the Ottawa power of sale stopped.