If you receive a Statement of Claim in Ontario as part of a Power of Sale, you don’t need to panic. Understanding what one of these is, your rights as a homeowner, and how to respond can calm your nerves and save your equity.
Learn how to stop a power of sale or foreclosure with private lender money at Mortgage Broker Store.
What is a Statement of Claim?
This is a legal document filed by the person starting a lawsuit called the plaintiff. It’s the starting point for a civil action. It needs to contain detailed explanations of circumstances, scenarios and events that gave rise to the claim in the first place.
A Statement of Claim must also outline the legal grounds for starting a lawsuit and the type of compensation the plaintiff wants.
These are usually filed with the Ontario Superior Court of Justice. The defendants can respond with a Statement of Defense or other legal remedies.
This is part of Ontario’s Power of Sale process, which a lender starts after a borrower breaks a mortgage agreement.
Why You Might Receive a Statement of Claim
There are several reasons why breaking a mortgage agreement can start a Power of Sale or foreclosure, resulting in a homeowner getting one of these statements.
Of course, at the top of the list is when the borrower does not uphold the terms of a mortgage. The mortgage can default when a borrower fails to make one or several mortgage payments. The borrower could also break the agreement based on a breach of a covenant. These can include using the property for legal activities or damaging it on purpose, as well as not paying the taxes or insuring the property.
Regardless of how a borrower breaks the mortgage agreement, the Power of Sale process involves issuing a Statement of Claim that gets sent to the borrower.
The Statement of Claim is issued to collect the debt and take possession of the home or property.
Legal Steps Following a Statement of Claim
There are several legal steps after a Statement of Claim has been issued. The Power of Sale process begins 15 days after default when a lender can deliver a Notice of Sale. That gets delivered by a registered letter, and the lender needs to wait 35 days or 40 days if a married couple occupies the house. There is a redemption period next. If the borrower doesn’t pay what is owed before this expires, the lender issues a Statement of Claim.
After that, the lender can sign a default judgment and ask a court to issue a Writ of Possession. Then, a sheriff can schedule a time to evict the mortgagors. The property is then sold, and the proceeds are used to pay off different debts.
Understanding Your Rights as a Homeowner
The Statement of Claim can be part of the Power of Sale process. It’s part of a legal framework whereby a borrower can be evicted from their property if they don’t take specific steps and understand their rights.
- First, homeowners have the right to respond to a Statement of Claim within 20 days with a Statement of Defence. Consulting with legal professionals is essential. A Statement of Defence can include errors in calculating what’s owed and insufficient notice provided by the lender. The Ontario Mortgages Act is a law that you can use to research your defence.
- A homeowner can choose to sell their home during a Power of Sale. While the process is underway, they may be able to get more for the property.
- They also have the right to redeem. In this case, they can stop the process by paying the total amount owed on the mortgage, which includes the lender’s costs and legal fees.
How to Respond to a Statement of Claim
There are other ways to respond to a Statement of Claim beyond a Statement of Defense.
Try Private Financing
A private lender can supply a product like a second mortgage to give you the money to halt the Power of Sale. These loans are interest only and use the equity you’ve built up. Homeowners can calculate their equity by subtracting outstanding mortgage balances from their current market value.
Remember, a Power of Sale usually indicates that the homeowner has financial issues that may have affected their credit score. Banks and traditional institutions emphasize this score, but private lenders have more flexible terms.
Try Negotiations
It’s always a good idea to try to negotiate with the lender. In some situations, the terms of the mortgage can be adjusted. A forbearance agreement can allow a borrower to pause mortgage payments or reduce them temporarily.
Of course, navigating a Statement of Claim in Ontario and Power of Sale can help save your equity and property. It’s also good to consider some proactive solutions to prevent the problem from happening again.
Preventing Future Mortgage Issues
Staying on top of your finances can help prevent problems. Here are three ways to prevent future issues from cropping up.
- Budget
Establishing a budget can help you manage your money and avoid mortgage problems. A zero-based budget emphasizes essential expenses like your mortgage. A zero-based budget accounts for every dollar of income, allocating it to items like savings or debt repayment. The end goal is total income minus total expenses equals zero.
- Build Up an Emergency Fund
Life can be full of unexpected expenses, such as emergency home repairs, job loss, and medical emergencies. Putting together an emergency fund that covers at least three to six months of expenses is a good way to deal with temporary issues.
- Monitor Your Credit Score
Staying ahead of any kind of financial problems means monitoring your credit score. If you’re looking for a traditional loan, a good number here shows creditors that you’re reliable. Private lenders don’t put as much emphasis on these numbers. However, you can check the score at either TransUnion or Equifax.
Check for things as simple as old addresses that are still being used and misspelled names. Look at all the amounts you owe and ensure they are updated and accurate.
Jonathan Alphonso is a real estate professional who can help you navigate A Statement of Claim and supply a private loan to stop a Power of Sale. You can get more information on his two websites: mortgagebrokerstore.com and powerofsalesontario.ca. Call him at 416-499-2122 or by email at ron@powerofsalesontario.ca.
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