Trying to manage your own private mortgage could be a daunting task, especially if you have more than one. Administering a mortgage loan is the servicing required after the loan agreement or mortgage commitment has been executed. The lawyers and administrators at Levy Zavet can also facilitate the mortgage underwriting and loan before it closes.
Levy Zavet often acts as a loan administrator to its mortgage lenders as clients. Typically our mortgage lender clients outsource their loan administration once the loan closes (which we handle as well). Borrowers will also receive a letter that explains that we will be administering the mortgage loan on behalf of the lender.
Mortgage lenders should be busy evaluating potential borrowers’ creditworthiness, the equity left on the collateral property and issuing loans. Rather than creating a separate department to service your loans, its often best to outsource this function to Levy Zavet that specialize’s in mortgage closings, mortgage administration and mortgage enforcement.
Servicing a mortgage after it closes requires the following:
- Informing the borrower of their interest only payments, or repayment schedule, often called an amortization schedule for blended payments of interest and principle.
- Collecting the contact information of the borrowers and guarantors and any next of kin to use in the case of an absent borrower. Also, informing the borrower of any changes such as an assignment of the mortgage loan to a different lender or lenders, and if any changes in how to make the periodic payments are required.
- Depositing the periodic post-dated cheques of the mortgage repayments or interest only payments, on time when they come due. Or alternatively withdrawing the periodic mortgage payments directly from the borrower’s bank account or other form of payment.
- Ensuring the mortgage payments clear, and if not, to immediately record the date and reason for the payment being returned as not being able to clear, for example insufficient funds from the bank.
- To forthwith send a demand for payment to the borrower for the mortgage payment that was returned, informing them that they are in breach of the terms of the mortgage agreement, and that it is a form of default under the loan. In this letter any penalties, NSF fees, and compounded interest due because of this missed payment is calculated and the borrower is told to bring in certified funds prior to any enforcement proceedings.
- Collecting and depositing or withdrawing the missed payment from the borrower’s account, failing which a legal demand letter is sent out pursuant to the regulations and laws governing the mortgage enforcement proceedings in the jurisdiction where the collateral real estate property is located. This will also take into consideration any terms in the mortgage agreement.
- Communicating and reporting to the mortgage lender, and if more than one, ensuring that the terms of the any inter-lender or co-lender agreements are upheld.
- Remitting the cleared mortgage payments from the borrowers to the lenders in a timely manner. Along with a breakdown of the remittance and an accounting of the payments to-date as it compares to the payment schedule pursuant to the mortgage agreement with the borrower.
- Assisting co-lenders on the mortgage with assigning their interest or portion of the mortgage loan to a new mortgage lender or to one of the existing mortgage lenders on the same mortgage loan.
- Preparing any assignment agreements and transfer documents of the mortgage loan and security from the existing mortgage lender to the new mortgage lender, and completing any registrations to perfect same.
- Responding to any requests by the borrower or their lawyer for payment history information, delaying or moving the date of an upcoming mortgage payment, correcting any errors or miscommunications, preparing mortgage information statements and accounting of the payments made pursuant to its schedule, and preparing mortgage payout statements for discharge purposes including any prepayment penalty calculations.
- Handling any responses to other mortgage lenders and encumbrancers, such as construction lien claimants that have also secured or registered their interests in the same real estate property secured.
- Enforcing any mortgage loans that are in default, including power of sale and foreclosure proceedings, as well as suing the borrowers and guarantors for any shortfalls after recovery against the collateral real estate property.
February 2021
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February 12, 2021
How to rely on the available exemptions in the Province of Ontario from the requirements to be licensed under the Mortgage Brokerages, Lenders and Administrators Act.
In Ontario, Dealing, Trading, Lending and Administering mortgages are all regulated activities, which requires licensing under the Mortgage Brokerages, Lenders and Administrators Act (the “Act”), ...
Read Post May 2020
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May 9, 2020
Registering a Notice to try and save a Power of Sale
Often, borrowers loosing their home to a power of sale will take any advise they can get to stop the process. Borrowers are sometimes led to believe that if you register something on title to the ...
Read Post February 2020
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February 11, 2020
Private Lending: Do not Rely on Someone Else’s Appraisal!
Often private lenders will receive a brief term sheet with an email introduction from a mortgage broker or agent trying to place a mortgage deal. Included in this email package may be an appraisal ...
Read Post October 2019
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October 25, 2019
Do Private Lenders need a brokerage license to lend in Ontario?
The Mortgage Brokerages, Lenders and Administrators Act, 2006, requires that a mortgage lender hold a brokerage license in Ontario. And that a person or entity is a mortgage lender in Ontario when ...
Read Post March 2018
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March 30, 2018
Changes to the Mortgage Syndication Rules
As of July 1, 2018, the Financial Services Commission of Ontario (FSCO) will begin enforcing the changes to the O. Regulation 188/08 Mortgage Brokerages Standards of Practice under the Mortgage ...
Read Post September 2017
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September 20, 2017
A MIC’s Specified Shareholder, Related Parties and Prohibited RRSP Investment Rules
The Question being asked is a brother or sister of a shareholder of a mortgage investment corporation (MIC) a specified shareholder (To qualify as a MIC for purposes of the Act, a corporation must, ...
Read Post July 2017
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July 25, 2017
MIC Foreign Investors & Withholding Taxes on Dividends
The Quick and Simple is that Yes, withholding taxes (usually 25% of gross amount unless subject to a tax treaty with the resident country of the payee) do apply on Dividends paid out by a Mortgage ...Read Post -
July 24, 2017
Islamic Financing and Riba Free Mortgages
Over the last few years, and especially since the financial crisis of 2008, the concept of Islamic financing or banking has been gaining momentum as an alternative financial model for lending and ...
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July 9, 2017
Challenges in Starting a MIC: Paying Dividends
One of the biggest challenges in running a MIC is when you first realize that the investors who were once your private lenders are now expecting the equivalent of their monthly interest cheques ...
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July 7, 2017
A MIC does not simply allow you to raise money from the public!
Mortgage Investment Corporations (“MICs”) are on the rise in Canada. With many of these MICs the founders and managers are confused over what regulators may or may not govern certain aspects of ...
Read Post May 2017
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May 4, 2017
What happens when Home Trust now needs to borrow money to advance you a mortgage loan?
What do you do when your mortgage lender now has to pay a higher interest rate to their own lender on the money they loaned to you?
Home Trust in crisis!
“Home Trust would be required to pay a ...
Read Post May 2016
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May 13, 2016
Can a borrower redeem their mortgage under power of sale?
The answer to this question is constantly evolving, with new and conflicting case law addressing specific facts released almost yearly. The old adage of being able to redeem your mortgage (payout ...
Read Post January 2015
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January 13, 2015
Annual Maintenance and Reporting Requirements of a MIC, a Mortgage Investment Corporation
Annually a MIC that issues its shares through a prospectus and registration exemption under securities law and regulations (e.g. not publicly traded companies), will be responsible for providing ...
Read Post December 2014
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December 23, 2014
What If A Mortgage Goes Bad In A MIC? What are the Investment Benefits In A MIC?
Management of the MIC must be vigilant and selective with whom they lend to, and investors can inquire about whether the MIC in question will allow investments within various percentage brackets ...
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December 23, 2014
Securities Law & Regulations of a MIC, a Mortgage Investment Corporation
A “Trade” (i.e. selling shares to investors in this case) triggers the “Registration” requirement, even if the trade is not a “distribution”. Just because there is not a prospectus ...
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December 23, 2014
Taxation of a MIC, a Mortgage Investment Corporation
The MIC itself will not pay income tax so long as the profits are flowed through to the shareholders and taxed in their hands. This is advantageous to an investor who has purchased MIC shares through ...
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December 23, 2014
Managing A MIC, a Mortgage Investment Corporation
The creation of a MIC is similar to other corporations in the method of organization, election of directors/officers and the faculty to appoint committees, hire employees, and issue ...
Read Post October 2014
June 2014
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June 19, 2014
How to be a Private Mortgage Lender
This video is an excerpt of an interview with Jeff Levy, the managing partner at Levy Zavet PC, Lawyers. The interview is about lending and private mortgages. As well as the most basic tips on how to ...
Read Post January 2014
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January 28, 2014
MICs: The Technical Aspects of a Mortgage Investment Corporation
TYPE OF ENTITY FOR A MORTGAGE INVESTMENT CORPORATION
- A Canadian Corporation throughout the taxation year where its business only undertakes to invest its funds, and thereafter qualifies as a MIC, ...
August 2013
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August 14, 2013
A MIC or a Mortgage Investment Corporation: What are they and how do you start one?
With significant potential for favourable rates of return and previously instituted tax exemptions, Canadian Mortgage Investment Corporations (MIC’s) are increasingly becoming recognized as a ...
Read Post September 2012
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September 12, 2012
Can a lender charge a mortgage pre-payment penalty under Power of Sale proceedings or once the mortgage term has matured, regardless if it is an Open or Closed Mortgage?
Under section 17 of the Mortgages Act, and pursuant to relevant case law the answer is “Yes” the lender can. Subject to the wording in the original mortgage commitment/agreement, you will often ...
Read Post August 2012
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August 23, 2012
Everyone’s a “Builder”, but what does that mean in terms of HST?
For purposes below referring to a “house” includes a condo as well. Did you know that CRA will consider you a “Builder” if:
1) You are an individual or corporation;
- And you own ...
July 2010
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July 29, 2010
Issues in Mortgage Law
Foreclosure: When and Why?
It is not uncommon to combine a claim for foreclosure with a claim for the amount due under the covenants contained in the mortgage. Thus, an action for foreclosure is for ...
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