Burgar Rowe Professional Corporation:
Mortgage Remedies

Mortgage remedies relate to the enforcement of the rights of a mortgage lender when the mortgage is in default, or from the borrower's perspective, defending against such enforcement.
There are a wide range of remedies available to a lender, but all have as their goal either correcting the mortgage default, or recouping the lender's money either in cash or by taking the land secured by the mortgage instead. In addition to the legal processes which recover money, mortgage enforcement may also lead to a lawful right, on the part of the mortgage lender, to possess the property, to the exclusion of the defaulting owner. While there are many avenues of enforcement, the more popular remedies are as follows:

(1) Power of Sale: This procedure allows a mortgage lender to sell the property of the defaulting borrower, and from the sale proceeds, extract the balance outstanding on the lender's loan, including interest and the lender's costs. The surplus, if any, is turned over to other parties having legitimate secured claims of a lower priority on the property, or in the absence of such creditors, to the owner.

(2) Foreclosure: This procedure results in the mortgage lender owning the property which is taken in place of the mortgage debt. A borrower should however recognize that the registration of the final order attracts Land Transfer Tax consequences that to the extent of the debt.

(3) Statement of Claim for Judgment on the Covenant: When mortgage documentation is signed, perhaps the most important covenant a borrower gives, is a promise to pay. In these circumstances a lender sues on that broken promise to pay and recovers judgment against the borrower in the amount of principal, accrued interest and the lender's costs. The judgment may then be registered with the Sheriff and property of the debtor seized to satisfy the judgment. This type of action is often used together with a power of sale, particularly in circumstances where the lender believes that the liquidation of the property will not fully satisfy the debt. The judgment against the debtor, gives the lender a right of recourse for the difference between the amount of the judgment, and the amount realized on liquidation of the land. Often a claim for possession is also included in a Statement of Claim which eventually leads to the Court issuing a Writ of Possession which lawfully permits the lender to take possession of the property, and have the owner removed if necessary.

(4) Judicial Sale: As the name implies, this remedy involves a Court ordering the sale of a property and overseeing all matters related thereto.

Given virtually all mortgage loans require the borrower to compensate the lender for the lender's legal and other associated costs, mortgage remedies is a rather unique area of law to the extent that the lender (other than in foreclosure actions) is likely to recover its costs provided there is sufficient additional value in the land to pay for same.