Dec 06, 2021
THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part LXIV of a Series – Mortgage Statements Part 10
In the previous Post LXIII I looked at why some third party mortgage financiers (who repay a prior mortgage on title) ask for and take an assignment of that prior mortgage, rather than register their own new mortgage and insist on a discharge of that prior mortgage. In this blog, I look at the rules that govern discharges and assignments of mortgages
We are all aware of the typical refinance scenario. A new lender asks the existing mortgagee for a discharge statement. The new lender advances funds to the homeowner/borrower. These new funds are used (at least in part) to repay the existing mortgage, which gets discharged at or shortly after the closing of the new mortgage loan advance. A new charge is registered on title to the property to secure the new funds advanced.
But subsection 2(1) of the Mortgages Act allows a homeowner/mortgagor to require that the existing mortgagee assign the mortgage to the new financier rather than giving a discharge of this existing mortgage. This is the statutory authority relied on to make these assignment transactions occur. But there are few practitioners who seem to be aware of subsection 2(3) of the Mortgages Act, which provides that subsection 2(1) does not apply if the mortgagee is or has been in possession.
So, one must ask, why is possession important here? Why can a new mortgagee require the existing mortgagee to assign its mortgage security to the new lender only when the existing mortgagee is not in possession of the mortgaged property? Or conversely, why can a mortgagee in possession of mortgaged property refuse to give an assignment of its mortgage security when repaid, and insist on discharging its mortgage security instead?
The next post will attempt to answer these questions. And 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 power of sale and mortgage default 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.