In the prior three posts HERE and HERE and HERE I examined demand letters in some detail; when and why private mortgage lenders should start the mortgage remedy action with a demand; and what the demand ought to say. In this post, I wonder aloud whether issuing a demand letter ‘in these strange and uncertain times’ is an appropriate response to a mortgage default?
As we all are well aware, the Covid-19 Pandemic has literally changed everything. Socially, economically, recreationally and spiritually – nothing is the same anymore. I am neither a sociologist nor a student of modern philosophy. Yet I believe that most of us will agree that for so long as the current lock-down in Ontario continues in its current manifestation, it would be entirely inappropriate for any mortgage lender to issue a demand letter to a home owner following a mortgage default or to take any new mortgage remedy actions or proceedings at all. At least until there is some easing of these draconian (yet absolutely necessary) restrictions on personal movement and one’s ability to earn an income or carry on business.
When, then, will it be appropriate for a mortgage lender to ‘call’ its private mortgage loan that is in default. Or to otherwise start taking steps to collect it secured mortgage debt? That is the $64,000 question.
While on the one hand, no one can fault a private lender or private mortgagee from wanting to protect her or his mortgage investment. But on the other hand, taking mortgage remedy steps ‘too soon’ (before easing of the stay at home mandate) will not be looked upon with favour by the press, the courts or the public in general.
Perhaps a part of the solution is for private mortgagees to try to differentiate between a Covid-19 related default and a non-Covid-19 related default. This analysis might assist the private mortgage lender when attempting to determine which mortgagor will be the more likely to bounce back once some sort of economic normalcy is upon us, and conversely, which mortgagor will not be quite so resilient. But in either case, mortgage lenders must forbear from taking any new debt collection and mortgage remedy steps at this time. At least until there is some easing of current restrictions. Why?
Because it is the right thing to do? Or because debt recovery is severely restricted at this time in any event? The courts’ slow down and focus on emergency matters (civil debt collection not likely to be an emergency any time soon) removes court orders for possession and court issued writs of seizure and sale from a private mortgage lender’s arsenal. While it is currently possible to issue a statement of claim electronically, personal service of the issued statement of claim while maintaining social distancing is not practical. And courts will not be issuing judgments during the current situation, not until court staff are back on the job – which seems to be weeks (or months) away.
So debt collection is limited to written and verbal demands, with no assistance from judgment enforcement. And mortgage remedies are similarly thwarted, as the courts cannot be used to obtain possession of homes. Unless a mortgage lender finds a mortgaged property abandoned, appraising and listing for sale and permitting buyers’ inspections will not really be practical either.
We have heard the politicians, epidemiologists and medical professionals all tell us that the status quo is here for a while. Perhaps quite a while. And we are assured that we are ‘all in this together’. Well, I suppose that means that private mortgage lenders have to jump on the bandwagon and do their part, no matter how costly. At least for the foreseeable future.
In the next post I'll return to private mortgage lenders' remedies. And as always, this blog is intended for information purposes only. It is not legal advice and cannot be relied on as such. Nor is it a substitute for hiring your own legal counsel, who will be an essential member of your mortgage default and mortgage remedy team. And lastly, this blog is just my opinion. I reserve the right to change my mind. And I reserve the right to be wrong.
Be well and stay healthy.