Sep 25, 2021
THE NEW REALITY: PRIVATE MORTGAGE DEFAULTS - POWER OF SALE & FORECLOSURE - Part LVIII of a Series – Mortgage Statements Part 4
In the previous Post LVII I continued a review of mortgage statements, looking at mortgage statements for information purposes and mortgage statements for redemption purposes. This post will touch on errors in mortgage statements and how the courts have handled mortgagee mistakes.
The most common mistake that I see in mortgage statements occurs when a mortgagee with a multi-part mortgage (2 or more loan facilities secured by one mortgage, that is) is asked for and gives a mortgage statement for discharge purposes that leaves one or more facilities off of the statement. An example might look like this:
- a home owner borrows, say, $500,000 under a first charge to help buy a home and then also takes out a line of credit with a $75,000 limit that is secured by the same first charge
- the borrower starts repaying the $500,000 loan with blended instalments of principal and interest and also draws down $50,000 under the line of credit
- the borrower agrees to sell the home and her or his lawyer asks the mortgagee for a discharge statement
- when the mortgagee issues the discharge statement, it includes only the $500,000 mortgage loan facility in the statement and forgets to include the $50,000 owing under the line of credit
- at the closing of the sale of the home, the owner instructs her or his lawyer to pay to the mortgagee the exact amount stated to be owing in the discharge statement, being the $500,000 plus per diem interest, but does not pay down any of the line of credit
Is the mortgagee obligated to give a discharge of its first charge of the home whewn $50,000 is still owing under its first mortgage?
What happens to the new home owner’s first mortgage?
Is the borrower (former home owner) responsible for repaying the $50,000 line of credit?
Next blog will continue to unpack mortgage statement errors by answering these questions. 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.