May 16, 2021
THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part XLVI of a Series –Litigation part 6
Post XLI started an in depth look at power of sale litigation. The previous Post XLV explained that when the mortgagee is enforcing its mortgage remedies and starting power of sale litigation, the mortgagee is allowed to sue both the original mortgagor or mortgagors (who signed the mortgage) and, as well, the current owners of the mortgaged property. But, the mortgagee cannot obtain judgment against both. The mortgagee must make a choice and obtain judgment either against the original mortgagors who signed the mortgage document or, alternatively, against the current property owners. There does not appear to be to be any particular logic to this requirement that the mortgagee choose one or the other – it’s just a rule in the Mortgages Act. And it’s a rule that must be followed.
But leaving aside for the moment who the mortgagee should sue when its mortgage is in default, this post will start to unpack the issue of which debts the mortgagee should include in the power of sale litigation. One answer to this query is that the mortgagee should (obviously) sue the mortgagor for all debts owing under the mortgage in default. But in my humble opinion, that is not the most advantageous answer for a mortgagee. It’s not wrong, of course – just not necessarily what is best for a mortgagee.
So let’s step back and look at the various components of a mortgage debt. Of course, there is the principle amount owing under the mortgage. And accrued interest. And often, interest on overdue interest. And costs. Some costs are specifically mentioned in the mortgage as amounts that the mortgagee is permitted to incur, such as paying outstanding realty taxes or property damage insurance on any improvements at the mortgaged property. Other expenses are just lumped together as those necessary to preserve the security of the mortgage or those incurred in connection with the enforcement of the mortgage.
The next post will take a deeper dive into what costs should be added to the power of sale litigation, and why. 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 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.