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Tag: case law

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 find that lenders will charge 3 months interest pre-payment penalty if they have to enforce the mortgage via a power of sale proceeding or if you neglected to renew the mortgage once the term has expired and have failed to pay the lender out (within the time allotted pursuant to the lender’s notice).  Also, often enough, the original mortgage commitment/agreement will have qualified wording for “Open” mortgages stipulating that so long as the borrower is not in default, the borrower will be able to pre-pay the mortgage in whole or in part without a penalty or bonus.  However, once in default, a lender can demand the penalty payment of three months’ worth of interest calculated on the then outstanding principle balance, even if your mortgage is an Open one.In relevant case law the courts have often ruled in favor of the lender on disputes over its right to charge penalties pursuant to section 17 of the Mortgages Act, where the borrower was found in default of payment of any principal or interest money. 

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Mortgage Enforcement: What Can Go Wrong?

Notice of Sale and RequisitionsIf a purchase is made under power of sale, it is necessary to ensure that the vendor is authorized to conduct the sale and that the power of sale proceeding has been properly commenced. A requisition, in this respect, by purchaser’s legal counsel is expected to bring forth a statutory declaration attaching evidence of service of the notice of sale.  The usual practice is to attach to the statutory declaration evidence of service of the notice of sale by registered mail, including the registered mail receipts. The Court of Appeal ruled in CIBC Mortgage Corp. v. Chopra that service by registered mail to the address provided for in the mortgage would be quite adequate for the purpose.Typical Schedules to APSVendors of properties under power of sale more often than not include a schedule to the agreement of purchase and sale which significantly alters the usual terms of a sale/purchase transaction.

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