WHAT YOUR BANK WILL NOT TELL YOU!

I know the Xmas/New Year festivities have just passed. If you are like me, you probably spent more than what you budgeted for. If you did not spend more than what you budgeted for, kudos to you.

By Olubunmi Ogunniyi, LL.B. (Hons),B.L., LL.M. Barrister & Solicitor

E-mail: olu@ogunniyilawoffices.com

For a number of people, by the time January arrives, their budget has already been stretched and there is now more "month" than "money". Sometimes, payment of bills and expenses gets delayed. One of those bills is the mortgage payment.

I do concede that there are other reasons for mortgage payments being missed or delayed. It could be due to the loss of a job, sickness (particularly if you are self-employed), marital/relationship problems, business losses etc.

Typically, if you miss a mortgage payment, you may get a "friendly" telephone call from your Bank and/or Mortgage Company reminding you that you "may have forgotten" that your mortgage payment was due on that day. If the payment remains unpaid, you will most likely get what I call a "love letter" from your Bank, reminding you of your "relationship". (If you think about it, the relationship with your Bank is a long-term relation isn't it? It appears it lasts longer than most marriages!).

If the non-payment persists, you will most likely receive a "not-so-friendly" letter from the Bank's lawyer. Generally the Bank's lawyer will subsequently send out a Notice of Sale. This is where things start to get "serious". You know it is serious because you will almost certainly receive the Notice of Sale by registered mail.

From my experience, people start to panic upon receipt of the Notice of Sale. One source of panic is that the Notice of Sale specifies that the Bank will be selling your property if the sums requested pursuant to the Notice of Sale remains unpaid. Another source of panic is that the Notice of Sale will not only ask for the missed payment or payments it will also require payment of all the sums due under the mortgage plus default fees, any late payment charges, legal fees etc.

Here comes the GOOD NEWS

It is true that in the event of default in your mortgage payment, the Bank has the right to request all the sums due under the mortgage.

It is also true that as a mortgagor you have certain rights under the Mortgage Act. The Mortgage Act offers a variety of protection to home owners.

It is not uncommon, for instance, for a homeowner to mortgage his or her property for a fixed-term of say, 5 years. For example,you may have mortgaged your property from the period commencing October 1,2010 to and including September 1,2015.

Now, if you have a 5-year fixed-term mortgage as noted above and there is a default in mortgage payments, you have the right to only pay the arrears (and any applicable legal fees) and you do not need to pay the entire amount being sought by your Bank under the Notice of Sale. Your Bank will not tell you about your right to only pay the arrears to place the mortgage in good standing but as a homeowner, you are protected by virtue of Sections 22 and 23 of the Mortgages Act.

So, this means that once you pay the arrears (and if applicable, legal fees), the Bank cannot continue with its enforcement steps to sell your property.

Your Bank will not tell you about your right that it has an obligation to provide you, the homeowner, with a statement of the arrears and/or the amount in default. You, as a homeowner, have the right to request a statement with respect to such arrears and pursuant to Section 22 (2) and (3) of the Mortgage Act, the Bank must provide you with such a statement within 15 days of requesting same.

I am definitely not advocating that you should not make your mortgage payment a priority. However, the ability to place your mortgage in good standing can be a source of relief to a lot of homeowners who are self-employed.

As self-employment does not come with any guaranteed income on a monthly basis, for a number of reasons (including sickness, business being "slow" etc), mortgage payments are missed and you have a fixed-term mortgage as noted above, remember, you have a right to place the mortgage in good standing without having "sleepless nights".

Action Steps

So, knowing that your Bank will most likely not advise you of your rights as a homeowner in the event of default in mortgage payments, the following are some desirable action steps when "life happens"

1) It sounds simplistic - but do not panic;

2) Seek the advice of a lawyer that practices in the area of mortgage enforcement;

3) Particularly if you are self-employed, lean towards fixed-term mortgages (similar to the example highlighted above); and

4) Be wary of entering into mortgage contracts where payment is "on demand".