Aug 16, 2021
THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part LV of a Series – Mortgage Statements Part 1
In the previous Post LIV I explored ILA – Independent Legal Advice - and answered the question 'when is ILA needed'? In this post, I will delve into mortgage statements; what they are and when is each type typically used.
There are actually different kinds of mortgage statements. At the most basic level, there are mortgage statements for information purposes, mortgage statements for discharge purposes and mortgage statements for redemption purposes. Each serves a slightly different purpose, although they all ask the mortgagee to confirm details of the mortgage loan in question.
Mortgage statements for information purposes are usually requested by someone other than the mortgagor/home owner. The party requesting the mortgage statements for information purposes usually has an interest in the mortgaged property. They may be a subordinate mortgagee or an execution creditor, for example. And the requesting party usually wants to know the amount outstanding under the mortgage and whether the mortgage is in good standing or in default.
A very common circumstance where a mortgage statement for information purposes is required and requested is when a mortgagee is contemplating lending new mortgage funds to the owner/mortgagor in a subordinate role. That is, the new lender wants to take a 2nd or 3rd (etc) mortgage and is not intending to repay the prior registered mortgage. This new lender needs to know how much is owing under the prior mortgage and needs to know whether or not the prior mortgage is in good standing. The latter confirmation is needed to protect the new lender.
You see, if the prior mortgage is in good standing when the new mortgage is advanced and registered, then the prior mortgagee will be obligated to serve on the new lender a copy of any notice of sale that it issues. This will give the new lender full knowledge of any subsequent defaults under the prior mortgage. However, if the prior mortgage is not in good standing when the new mortgage is advanced and registered (and if the prior mortgagee has already served its notice of sale) then the prior mortgagee can sell the mortgaged property at any time without any notice to the new lender. Obviously, that would be a catastrophic result and has to be avoided at all costs.
Next blog will continue to unpack mortgage statements. 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.