The powerofsalesontario.ca management team and our parent company, Mortgage Broker Store, have been getting many requests about matters related to COVID-19. The most common question is, “Do lenders still have the right to proceed with a power of sale?”. While banks have been ordered by the government to defer mortgage payments, private mortgage lenders are not required to accept deferrals. While most private lenders have voluntarily allowed payment deferrals, some are still demanding payment. Private lenders can begin the power of sale process by sending out a Notice of Sale document. Every document that comes after the Notice of Sale must be filed with a court. Currently, all Ontario courts are closed and are not accepting power of sale documents. While a lender may start a power of sale, it is not possible to complete the process. Ontario’s sheriff offices, which process residential evictions in Ontario, are also closed. Since only a sheriff can perform a legal eviction in Ontario, all evictions are also postponed. This means that lenders who have reached the final steps in the power of sale process cannot evict.
The most common ways of preventing a power of sale or foreclosure are to arrange a new mortgage or to sell the property. Unfortunately, both solutions have been made more difficult due to the COVID-19 crisis. Many service providers that are required for the mortgage process have also increased fees, wait times, or are closed. Appraisal companies, law firms, and real estate agencies are examples of these service providers. Both buying and selling real estate has been made more difficult as well. Realtors across Canada have been discouraged from performing open houses. With high-employment rates, far fewer people are getting mortgage approvals. All these issues have made real estate transactions much more difficult.
In some cases, we’ve recommended that borrowers who are in power of sale wait until the COVID-19 crisis is over. Since lenders cannot complete a power of sale, the typical urgency to stop the process does not apply. In Ontario, foreclosures are far less common than power of sale actions, but this would also apply in the case of foreclosure.
Many alternative mortgage lenders are continuing to lend mortgages despite the COVID-19 related challenges. Most lenders have increased restrictions on their lending criteria, and many have stopped lending altogether. In the past it was possible to borrow up to 85% of the value of a property, however this maximum has been reduced to 75% in general. Many private mortgage lenders also worry that real estate values may drop 10% or more across Canada. Mortgage Broker Store, which is both a mortgage brokerage and a private lender is continuing to provide mortgages.
In some cases, Mortgage Broker Store has taken over mortgages from other private lenders. Many large Mortgage Investment Corporations (commonly called MICs) are preventing their investors from withdrawing funds. MICs are one of the largest sources of private funds and each MIC is responding differently. Many MICs and other alternative lenders are seeing longer processing times as most of their employees are adjusting to working at home.
The government of Canada is offering financial assistance to Canadians who have been impacted by COVID-19. For all those who contact us asking for new financing, we first advise that they read over the Government of Canada’s official COVID-19 information page. In many cases, the government is directly giving money out to Canadians or providing interest-free loans. For people facing a loss of income, the Canada Emergency Response Benefit (CERB) can provide $2,00 every four weeks for up to 16 weeks. Those who receive the Canada Child Benefit will be eligible for an extra $300 per child throughout 2020. Via the special goods and services tax credit, low to mid-income companies will also get automatic payments if eligible. The benefit payout is around $400 for individuals and about $600 for couples. The government is also deferring income tax payments until after August 31, 2020. This tax deferral allows Canadians who’ve saved up money to pay taxes the ability to spend now to deal with COVID-19 related hardships. For anyone who is having issues with their bank mortgage, the government is allowing mortgage deferrals. Each bank is implementing its deferral program differently, and the Canadian Bankers Association is maintaining a web page that has links to the official deferral information for each Canadian bank. Since the COVID-19 crisis is changing every day, it is strongly recommended to first visit the government’s COVID-19 page before making any financial decisions.