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Jan 24, 2021

THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part XXXVI of a Series – Examining Default Fees and Penalties part 2 of 5

My last post Part XXXV started a conversation focusing on the fees, charges and penalties that private mortgagees (and some institutional mortgage lenders, as well) have been known to add to discharge statements when the mortgage is in default. I listed many of these after-default fees and charges - which go well beyond an interest rate increase after default and beyond demanding a 3-month’s interest penalty be paid. And are likely to include many excessive charges for any and all post-default actions or proceedings that the mortgagee is required to take in its efforts to have its mortgage repaid.

Now, don’t get me wrong. I empathize with the mortgagee. She or he lent monies to the mortgagor in good faith for an agreed upon term, and quite reasonably expects the mortgagor to live up to her or his promises. It goes without saying that the mortgagor should make all interest and principle payments on a timely basis and should repay the mortgage debt in full on the maturity date. But we do not live in a perfect world.

And so, when the mortgage goes into default, just what is the mortgagee entitled to charge the mortgagor over and above principle and interest? And conversely, how much is the mortgagor obligated to pay to the mortgagee after default in order to be entitled to obtain a discharge of the mortgage?

Should a mortgagor be obligated to pay a mortgagee more than the principle amount borrowed and interest, just because the mortgage is in default? And does the wording of the mortgage contract itself change the law in this regard? 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.