Mar 14, 2021
THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part XLI of a Series – Power of Sale Litigation part 1
My 25th post (Part XXV) from last September, 2020 began a review of power of sale (or mortgage remedy) litigation. When I reread this older post today, I realized that I may have glossed over many important takeaways, as I rushed through the topic. Today, I intend to start a series of posts aimed at unpacking many of the hidden gems mentioned in this older post.
So, let’s have a look at the best time to start power of sale litigation. Some lenders like to start the power of sale process with the issue of a notice of sale (Part XII). Other lenders insist on starting the process with the issue and service of a statement of claim. Which is better? What do I prefer?
Honestly, there are advantages and disadvantages to both schools. When the power of sale action is started with litigation, with the issue of a statement of claim, the claim is usually served on the defendants (usually the homeowners) before the notice of sale is issued. If service of the statement of claim is achieved quickly, then the notice of sale can immediately follow the service of the statement of claim and the 2 time periods (the time for the homeowner to serve and file her or his defense and the 35 day redemption period in the notice of sale) can run concurrently. This is the big advantage of starting the process with the statement of claim, and can speed up the process by 2 or 3 weeks right from the get go.
Usually, service of the statement of claim on all homeowners is a simple and straightforward undertaking, rarely taking more than a week. But every once in a while, a home owner cannot be found - -or is just evading service. While efforts are made to serve the claim, which may require a court attendance asking for assistance from the court, time is ticking, weeks can turn into months, and no notice of sale has yet been issued. So the downside of starting with litigation is that every once in a while, it severely slows the power of sale process.
When the power of sale proceeding is started with the notice of sale, this automatically gives the homeowner 35 days to redeem the mortgage and during this 35 day period, the mortgagee is prohibited from taking any fresh steps in the power of sale process. So, the issue and service of the statement of claim has to wait for the end of the 35 day redemption period to expire. In this scenario, the 2 time periods run consecutively (rather than concurrently) and so the process is guaranteed to be 2 or 3 weeks slower. But if service of the statement of claim proves to be difficult, the 35 day redemption period from the notice of sale has already run its course and expired.
The next post will be a deeper dive examining other power of sale litigation issues. 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.