A mortgage is a contract between an owner of property and a lender for the loan of money. The amount of the loan is secured by registering the mortgage against the owner’s land. The property owner is “the mortgagor,” the lender is “the mortgagee.”
When a mortgagor has defaulted in paying the mortgage, the mortgagee has two remedies against the mortgagor. The mortgagee may either sell the mortgaged property by means of power of sale proceedings and be paid out from the proceeds of sale, or the mortgagee may obtain title to the mortgaged property by means of a foreclosure action.
Before either enforcement remedy is exercised, the mortgagee will make written demand on the mortgagor to bring the mortgage into good standing by paying up the mortgage arrears and any accrued legal costs. It is important for a mortgagor to make every effort to comply with this demand. It is much easier to borrow a little money from family or friends at this early stage than to attempt a major refinancing to pay out the entire mortgage after the onslaught of enforcement proceedings.
In a power of sale proceeding, the mortgagor has between 35 and 45 days to pay the money due under the mortgage. If the sale of the mortgaged property proceeds and the mortgage debt has not been fully satisfied, the mortgagee is entitled to sue the mortgagor under the mortgage contract to recover the shortfall.
In an action for foreclosure, the mortgagee takes the land and cannot pursue the mortgagor for any shortfall under the mortgage. However, foreclosure may have some attraction to a mortgagee in a depressed real estate market where power of sale proceedings will lead to a substantial shortfall and the mortgagor has no financial means to pay it. The mortgagee may prefer to take the land and wait for a better selling market to cover the shortfall.