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Jan 17, 2021

THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part XXXV of a Series – Examining Default Fees and Penalties part 1 of 5

Most of my readers will be familiar with the myriad of the fees, charges and penalties that are typically added to the mortgage payout amount or discharge statement by mortgagees, especially by private mortgagees when the private mortgage is in default. These additional amounts imposed by private mortgagees upon unsuspecting owners/mortgagors after default in repayment include:

  • fees for each late payment – often charged for each late payment and also for any payment that was missed entirely
  • fees for each NSF or dishonoured cheque
  • fees if the mortgage goes into default
  • fees if the mortgage is not paid at maturity – called a ‘renewal fee’ or extension fee (or temporary extension fee)
  • fees if the mortgagee has to obtain a realty tax certificate from the municipality
  • fees if the mortgagee has to make a realty tax payment
  • fees if the mortgagee has to remind the owner/mortgagor to provide proof of insurance
  • fees if the mortgagee has to buy its own insurance for the mortgaged property
  • fees if the owner/mortgage do not supply post-dated cheques
  • fees for each mortgage remedy step, action or proceeding started by the mortgagee; such as issuing a statement of claim, obtaining default judgment, serving a notice of sale, bringing a motion for possession and going into possession etc
  • fees for each mortgage statement requested
  • fees for each discharge statement requested
  • 3 months interest penalty
  • a new, higher interest rate that commences on default or if the mortgage is not repaid at maturity

As is fairly clear, there are many overlapping charges here and it is not unusual for private mortgage lenders to engage in default fee ‘double dipping’ – charging owner/mortgagors fee upon charge upon penalty for being in default. Seems a tad unfair, doesn’t it?

But more importantly, is it legal? Can a private mortgage lender (or any mortgage lender for that matter) get away with these kind of post-maturity or post-default penalties? Does it matter if the additional amounts are called interest or fees or charges or penalties? Does it matter if the aggregate amount charged is just a small percentage of the original mortgage debt?

What are the rules? That will be the subject of the next couple of posts. And remember, that 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 power of sale 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.