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NAVIGATING ONTARIO’S MORTGAGE DELINQUENCIES: UNDERSTANDING RISING DELINQUENCIES AND ONTARIO’S MORTGAGE CRISIS

mortgage delinquencies

Mortgage Delinquencies Introduction

Have you been keeping up with your bills lately? You might have spotted a troubling trend in financial news. More and more Ontario homeowners are trying to keep up with their mortgage payments. Last quarter alone, over 11,000 mortgage delinquencies were recorded—nearly triple what we saw back in 2022!

I’ve been watching this situation unfold with growing concern. Homeownership has long been considered a cornerstone of financial stability, but that foundation seems increasingly shaky for many families.

In this Brandon’s Blog post, I’m digging into Ontario’s current mortgage crisis to uncover what’s behind these alarming numbers and share some insights that might help if you’re feeling the pinch.

Current State of Mortgage Delinquencies in Ontario

The numbers don’t lie, and they’re pretty sobering. Over 11,000 mortgage delinquencies in just one quarter (Q4 2024) represent almost three times what we saw in 2022. I was shocked when I first came across these statistics.

To put this in perspective, we’re looking at a 50% increase in delinquencies compared to pre-pandemic levels. For homeowners, this signals potentially rough waters ahead. From what I’ve gathered, the primary culprits behind this crisis are the rapid rise in interest rates combined with the sky-high home prices we saw during the pandemic.

  • 11,000 mortgages overdue in Q4 2024
  • 50% jump from pre-pandemic levels

The Bigger Picture

Equifax Canada recently reported a significant uptick in missed payments. But these aren’t just abstract numbers—they represent real families facing financial hardship. Rebecca Oakes, VP of Advanced Analytics at Equifax, put it well when she said:

“The rise in missed payments indicates deeper financial strains among consumers.”

Her words hit home for me. I’ve spoken with several homeowners who bought during the pandemic using variable interest rate mortgages. Many told me they expected rates might rise eventually, but nobody anticipated how quickly they’d shoot up. The result? Most of their monthly payments now go toward interest, with barely anything chipping away at the principal. These families have had to slash their spending and implement strict budgeting just to stay afloat.

The Ripple Effect

Ontario has seen a particularly troubling 90% increase in homeowners falling behind on mortgage payments by 90 days or more—outpacing similar trends in Quebec and British Columbia. Mortgage delinquencies reflect broader economic challenges affecting many households.

For example, the 90-plus day non-mortgage delinquency rate in Ontario jumped by 46.1%. This surge in payment struggles points to a larger issue with non-mortgage debts as well. Consumer debt in Canada has now reached an eye-watering $2.56 trillion, up 4.6% from 2023. That’s an enormous burden for families to carry.

mortgage delinquencies
mortgage delinquencies

Mortgage Delinquencies: What Lies Ahead?

Looking forward, I’m particularly concerned about the wave of mortgage renewals on the horizon. Over 1 million fixed-rate mortgages will come up for renewal in 2025. Many of these were secured when the Bank of Canada’s overnight rate was below 1%—now it stands at 3%. Based on my research, about a quarter of homeowners expect their monthly payments to increase by at least $150 when they renew. Can you imagine suddenly having to find an extra $150+ every month in an already tight budget?

With economic uncertainties looming, understanding your mortgage options becomes crucial. If you’re struggling, please don’t suffer in silence. Financial advice, deferral programs, or support from family and lenders can make a significant difference. In these challenging times, thoughtful financial planning is more important than ever.

As market conditions shift, I expect many distressed homeowners will soon be looking to sell. It’s a tough reality, but awareness and preparation can help navigate these turbulent waters.

Mortgage Delinquencies: Understanding Mortgage Delinquency vs. Default

Definitions and Key Differences

Throughout my years working with homeowners, I’ve noticed considerable confusion between mortgage delinquencies and defaults. Though related, they represent different stages of payment issues with distinct implications.

Mortgage Delinquency happens when you miss a scheduled payment or can’t make the full amount by the due date. Most mortgage agreements include a grace period—typically about 15 days—during which you can still make the payment without being considered delinquent. Once this grace period expires without payment, your mortgage enters delinquency status.

Delinquency is measured in days (30, 60, and 90 days delinquent) and represents the earliest stage of payment problems. It’s an early warning sign but is relatively common and often temporary. I’ve seen many homeowners experience short-term delinquency due to unexpected expenses, simple administrative errors, or temporary income disruptions.

Mortgage Default is more serious and occurs when you’ve failed to comply with your mortgage agreement terms for an extended period. In Canada, a mortgage is typically considered in default when payments are 90+ days past due, though this can vary by lender and province.

Default signals a fundamental breakdown in your ability or willingness to meet mortgage obligations. While delinquency can often be resolved with catch-up payments, default usually requires more significant intervention such as loan modification, forbearance, or in severe cases, power of sale proceedings.

The progression from delinquency to default isn’t automatic—many delinquent mortgages never reach default status as homeowners recover financially or make arrangements with their lenders.

The legal consequences differ significantly between delinquency and default, with much more severe ramifications once a mortgage enters default status. In Ontario, the Mortgages Act governs.

Legal Implications of Delinquency:

  • Credit Reporting: Mortgage delinquencies typically hit your credit bureau once a payment is 30 days late, damaging your credit score. This impact grows the longer the delinquency continues.
  • Late Fees: Lenders can charge late fees as outlined in your mortgage agreement, usually a percentage of the overdue payment or a flat fee.
  • Collection Activities: Expect contact from your lender through phone calls, emails, and formal notices as they try to resolve the situation.
  • Notice of Arrears: In Ontario, lenders may send a formal Notice of Arrears once you miss a payment, documenting the delinquency.

Legal Implications of Default:

  • Notice of Default: Once in default, your lender can issue a formal Notice of Default or issue a Notice of Sale Under Mortgage — the first step toward potential sale or foreclosure.
  • Power of Sale Proceedings: Ontario residential mortgages include Power of Sale provisions. After the time indicated in the mortgage, which can be as little as 15 days after default in making any payment provided for by the mortgage, lenders initiate these proceedings. They then must allow the 45-day statutory redemption period to expire before taking any other action.
  • Acceleration Clause: Upon default, lenders can trigger the acceleration clause in your mortgage agreement, making the entire mortgage balance due immediately rather than just the missed payments.
  • Property Seizure: Default can ultimately lead to the lender taking possession of your property through foreclosure or selling it through Power of Sale proceedings.
  • Deficiency Judgments: If selling your property doesn’t cover the outstanding mortgage balance (including additional default interest, fees and costs), the lender may pursue a deficiency judgment against you for the remaining amount.
  • Legal Fees: As a defaulting borrower, you’re typically responsible for all legal fees and costs associated with default proceedings, which can substantially increase your debt.
  • Long-term Credit Implications: Mortgage default can haunt your credit report for up to 7 years in Canada, severely limiting future borrowing opportunities.

If you’re facing potential delinquency or default, I strongly recommend early consultation with your lawyer and even with a Licensed Insolvency Trustee. Although an insolvency process normally does not deal with secured creditors like a mortgagee, it may be that your financial problems also stretch to unsecured creditor problems, like credit card debt. The Licensed Insolvency Trustee can guide you through options like consumer proposals or other debt relief measures that might help avoid the worst consequences. Eliminating your unsecured debt could be the answer to saving your home.

mortgage delinquencies
mortgage delinquencies

Factors Contributing to Mortgage Delinquencies

Increasing Consumer Debt Levels

From what I’ve seen firsthand, Ontario homeowners are under unprecedented pressure as consumer debt continues to climb. Recent Statistics Canada data shows that the average debt-to-income ratio for Ontario households has reached concerning levels. Many homeowners I’ve spoken with are juggling multiple debts alongside their mortgages—credit cards, car loans, lines of credit, you name it.

This debt stacking creates a precarious situation where even minor income disruptions can trigger a cascade of payment problems. When you’re already allocating a significant chunk of your income to various debts, mortgage payments—typically the largest financial obligation—become increasingly difficult to manage.

I’ve also noticed that the recent proliferation of “buy now, pay later” services and easily accessible credit has further complicated matters. Many homeowners find themselves servicing high-interest short-term debts, diverting funds that would otherwise go toward their mortgage.

Post-pandemic Underwriting Practices

The COVID-19 pandemic created unique conditions in the mortgage market that are now contributing to rising delinquency rates. During the pandemic, many lenders adopted more flexible underwriting standards as interest rates hit historic lows and property values soared.

These pandemic-era mortgages were often approved based on temporarily inflated property valuations and artificially low interest rates. Now that the market is normalizing, homeowners who purchased at the peak face the dual challenge of potentially underwater mortgages and less favourable refinancing options.

Additionally, income verification procedures are sometimes relaxed during the pandemic, particularly for self-employed borrowers or those with non-traditional income sources. Some homeowners were approved for mortgage amounts that, in retrospect, exceeded their sustainable debt capacity.

The aftermath of these lending practices is becoming evident as more homeowners struggle with payment obligations that seemed manageable under different economic conditions.

Rising Costs of Variable-Rate Mortgages

Perhaps the most significant factor driving mortgage delinquencies in Ontario has been the dramatic impact of interest rate increases on variable-rate mortgages. Many homeowners who opted for variable-rate products during the low-interest environment now face substantially higher monthly payments.

To put this in perspective, I recently worked with a family with a $500,000 variable-rate mortgage who secured their loan when rates were near historic lows. They’ve seen their monthly payments jump by nearly $700 as rates climbed. This kind of payment shock has devastated household budgets already stretched thin by inflation in other essential spending categories.

The situation is particularly challenging for first-time homebuyers who entered the market with minimal down payments and maximum amortization periods. These borrowers typically have less equity cushion and fewer options for refinancing or restructuring their debt.

As the trigger rate phenomenon continues to affect variable-rate mortgage holders, many borrowers are discovering that their payments are covering only interest, with no principal reduction occurring. This realization often leads to financial distress and, ultimately, mortgage delinquency if intervention measures aren’t taken promptly.

Mortgage Delinquencies: The Impact of Economic Conditions on Mortgages

Effects of Inflation on Consumer Behaviour

Inflation has emerged as a critical factor influencing mortgage outcomes across Ontario. I’ve watched as the persistent rising inflation rates over the past two years have fundamentally altered how homeowners prioritize spending and manage mortgage obligations.

When inflation drives up the cost of necessities like food, utilities, and transportation, homeowners face difficult financial trade-offs. Many families I’ve counselled find themselves allocating an increasingly larger portion of their income to basic needs, leaving less for mortgage payments. This reprioritization of expenses often happens gradually, with homeowners first cutting discretionary spending before falling behind on secured debt payments.

The “payment hierarchy” theory suggests that consumers typically prioritize payments in order of immediate necessity and consequences. Historically, mortgage payments ranked high in this hierarchy due to the fundamental importance of housing security. However, when inflation significantly impacts essential expenses, I’ve seen this hierarchy shift, with some homeowners choosing to meet immediate needs over making their full mortgage payment.

Bank of Canada statistics indicate that households facing inflation pressures without corresponding income growth are approximately 30% more likely to experience mortgage delinquency. This relationship becomes particularly pronounced when inflation outpaces wage growth for consecutive quarters, as we’ve seen in many regions of Ontario.

Another inflation impact I’ve observed is the reduction in financial buffers. Many Ontario homeowners who previously maintained emergency savings have depleted these reserves due to higher everyday costs, leaving them more vulnerable when unexpected expenses arise. Financial advisors typically recommend keeping 3-6 months of expenses in emergency funds, but recent surveys show over 40% of Ontario mortgagors have less than one month of payment reserves available.

The stability of employment remains perhaps the single most reliable predictor of mortgage payment performance. Ontario’s employment landscape has undergone significant structural shifts that directly impact homeowners’ ability to maintain mortgage payments.

Recent employment data reveals several concerning trends I’ve been tracking:

The growth of precarious employment, including contract, gig, and part-time positions, has created income volatility for many Ontario homeowners. Unlike previous generations who could rely on stable, long-term employment with predictable income, today’s workforce often experiences periods of fluctuation. This irregularity makes consistent mortgage payments challenging, particularly for households that secured mortgages based on income projections that assumed greater stability.

Sectoral shifts in employment have also contributed to mortgage stress. Industries that once provided reliable middle-income employment have contracted, while growth has concentrated in either high-skill positions requiring specialized education or lower-wage service sector jobs. Homeowners caught in these transitions often face income reductions that directly impact affordability calculations based on previous earning levels.

Geographic employment disparities within Ontario further complicate the mortgage landscape. While certain urban centers continue to experience employment growth, several regions face persistently higher unemployment rates. These regional economic differences create “hot spots” of mortgage delinquency in communities where employment opportunities have diminished. Data from the Canada Mortgage and Housing Corporation (CMHC) indicates that areas with unemployment rates exceeding the provincial average by 2% or more typically experience mortgage delinquency rates 40-50% higher than the provincial norm.

The emergence of remote work initially provided flexibility for many households but has since created new vulnerabilities. As companies adjust their remote work policies, some homeowners who relocated to more affordable areas based on remote work assumptions now face difficult commuting situations or potential job transitions, both of which can disrupt income stability and mortgage payment consistency.

For homeowners experiencing employment disruptions, I’ve found that the timing of intervention is crucial. Statistics show that homeowners who contact their lenders within 30 days of employment changes are significantly more likely to secure workable payment arrangements than those who wait until they’ve already missed payments. This highlights the importance of proactive communication between mortgagors and lenders when employment circumstances change.

mortgage delinquencies
mortgage delinquencies

Mortgage Delinquencies: Implications For Homeowners

I recently spoke with Pushkar, a software engineer living in British Columbia. Like many others, he’s feeling the weight of rising interest rates. In August 2022, Pushkar purchased his townhouse with a variable interest rate of 4.8%. At that time, he thought he was making a smart move. But as rates climbed, he quickly realized the reality was far different.

The Financial Strain

By 2023, Pushkar’s situation had changed dramatically. Most of his monthly payments were going toward interest. Only $400 was applied to the principal of his $950,000 mortgage. I remember how stressed he looked when telling me this—watching his hard-earned money disappear into interest payments while barely making a dent in his actual loan balance.

To cope with these rising costs, Pushkar and his family made serious adjustments. They implemented strict budgeting, cutting their spending by $800 each month. This wasn’t just a minor tweak—it was a complete overhaul of their financial lifestyle. They had to prioritize needs over wants, making tough decisions daily about what they could afford.

Emotional Toll

Stories like Pushkar’s highlight the emotional and financial toll of rising costs. It’s not just about numbers on a page. During our conversation, Pushkar confessed to experiencing anxiety and stress that was affecting his sleep and family relationships. The pressure of financial strain can feel isolating, but as I assured him, he’s far from alone in this struggle.

Wider Implications

Pushkar’s experience reflects a broader crisis affecting many homeowners. According to reports I’ve been following, mortgage delinquencies in Ontario have surged dramatically. Over 11,000 mortgages failed to meet at least one payment in the fourth quarter of 2024—nearly three times the amount recorded in 2022.

Rebecca Oakes, Vice President of Advanced Analytics at Equifax, notes that rising home prices and escalating interest rates are significant contributors to this crisis. As more homeowners face financial strain, the emotional burden continues to grow, creating a cycle that can feel unending for those caught in it.

What Can Be Done?

If you’re navigating these challenging times, consider your options. Based on my experience working with homeowners in similar situations, adjusting your budget is a critical first step. Can you identify areas to trim expenses? Are there ways to increase income?

Don’t hesitate to reach out for help. Seeking financial advice, utilizing deferral programs, or even talking to family and lenders might provide some relief. I’ve seen how staying informed and proactive can make all the difference.

Pushkar’s story serves as a reminder of the challenges many face today. While we can’t change the economic landscape overnight, supporting each other through these tough times can make a significant difference. Every story matters—your experience contributes to a larger narrative about resilience and hope in the face of adversity.

Mortgage Delinquencies: Impending Mortgage Renewals Are A Looming Financial Challenge

Are you facing a mortgage renewal soon? You’re not alone. I’ve been tracking the numbers, and over 1 million mortgages are expected to renew in 2025. Many of these were taken out when interest rates were below 1%. Now, as rates continue to rise, the financial landscape is shifting dramatically for many Ontario families.

The Reality of Rising Payments

Last month, I met with a couple who had been comfortably paying their mortgage for years. When we calculated their potential new payment at renewal, they were shocked to discover they’d face a $325 monthly increase. For them, this wasn’t just a minor adjustment but a significant hit to their household budget.

This scenario is playing out across Ontario:

  • Over 1 million mortgages due for renewal in 2025
  • About 25% of homeowners anticipate at least a $150 monthly increase
  • Some will face increases of $300-500 or more
  • Economic uncertainty complicates renewal planning

With the Bank of Canada’s overnight rate now at 3%, the days of ultra-low interest rates seem like a distant memory. For homeowners who secured their mortgages when rates were at historic lows, this change can feel overwhelming. I’ve seen firsthand how essential it is to prepare for the financial implications that come with these adjustments.

Understanding Your Mortgage Terms

As fixed-rate terms approach their end, understanding your renewal options becomes critical. I’ve found that many homeowners don’t fully grasp how their mortgage terms work until they’re facing renewal. The increase in payments will likely compound existing financial strain, especially since many people are already feeling squeezed by rising costs in other areas of their lives.

Rebecca Oakes, VP of Advanced Analytics at Equifax, highlights that the rise in missed mortgage payments indicates deeper financial strains among consumers. The pandemic drove home prices to soar, and now, escalating interest rates are adding to the burden. This situation isn’t just about numbers—it’s about real families making tough choices at kitchen tables across the province.

The Bigger Picture

Remember Pushkar’s story I shared earlier? His experience with variable rates offers a preview of what many fixed-rate mortgage holders will soon face. He had to cut spending by $800 monthly just to manage his payments. This serves as a stark reminder of the financial adjustments many will need to make when their mortgages renew at higher rates.

As I’ve been monitoring these trends, I’m particularly concerned about the troubling rise in mortgage delinquencies. Ontario has seen a 90% increase in homeowners falling behind on payments by 90 days or more. This situation reflects broader economic struggles that could affect many homeowners facing renewal in the coming year.

What Can You Do?

If you’re feeling overwhelmed by an upcoming renewal, you’re not alone. From my experience working with homeowners in similar situations, I strongly recommend seeking assistance before the situation deteriorates. Consider reaching out for financial advice from professionals who understand the current mortgage landscape.

I’ve seen how utilizing deferral programs or getting help from family and lenders can provide the necessary support to manage escalating costs. Understanding your mortgage options and planning your financial future is vital during this uncertain time.

As you prepare for your mortgage renewal, remember that being proactive can make all the difference. Start planning now, even if your renewal is months away. The landscape is changing rapidly, and the sooner you prepare, the better positioned you’ll be to face the challenges ahead.

mortgage delinquencies
mortgage delinquencies

Mortgage Delinquencies: Managing Financial Strain Amid Rising Rates

In my years helping homeowners navigate financial challenges, I’ve seen how rising mortgage rates can squeeze even the most carefully planned budgets. While the situation may seem overwhelming, I’ve found there are practical strategies that can help manage this strain effectively.

Budgeting has proven to be the most powerful tool in my financial toolkit. When working with clients, I always start by helping them track where their money goes. You might be surprised at what you discover when you look closely at your spending patterns. Here’s the approach I recommend:

  • List Your Income: Write down everything coming in, including side gigs or occasional earnings.
  • Track Your Expenses: For at least two weeks, record every dollar you spend. Those coffee runs and subscription services add up faster than you think!
  • Identify Needs vs. Wants: This is often the hardest part. I had one client who saved $300 monthly just by honestly separating essential expenses from nice-to-haves.
  • Set a Budget: Create realistic spending targets for each category and stick to them. I’ve found that using cash for certain categories helps many people stay on track.

Beyond budgeting, I’ve seen tremendous value in professional financial advice. A good financial advisor can spot opportunities you might miss and provide tailored guidance based on your unique situation. One of my clients discovered they qualified for a tax credit they hadn’t been claiming, putting an extra $2,200 back in their pocket annually.

For immediate relief, don’t overlook deferral programs. Many lenders offer temporary payment adjustments when you’re experiencing short-term financial difficulties. I recently helped a family secure a three-month partial deferral that gave them breathing room to get back on their feet after a medical emergency.

Don’t Hesitate to Seek Help

Pride can be expensive. I’ve seen too many people damage their financial futures by waiting too long to ask for help. Family and friends can be invaluable resources—not just for possible financial assistance but also for emotional support and practical advice. Sometimes, just talking through your situation can reveal solutions you hadn’t considered.

I always emphasize the importance of contacting your lender proactively. In my experience, lenders are far more willing to work with borrowers who approach them before missing payments. Many have hardship programs that aren’t widely advertised but can be accessed if you ask.

Stay Informed About Mortgage Options

With so many fixed-rate mortgages coming up for renewal soon, understanding what to expect is crucial. I’ve been helping clients explore alternatives like extending amortization periods to lower monthly payments or considering a blend-and-extend option if that makes sense for their situation.

As one financial expert, I work with often says,

“Navigating these times requires proactive measures to maintain financial health.”

This couldn’t be more true—waiting until you’re in crisis mode limits your options significantly.

Empower Yourself with Knowledge

I’m a firm believer that financial education is key to weathering economic challenges. When I teach financial literacy workshops, I see how empowering it is when people truly understand their mortgage terms, interest calculations, and available options.

Take some time to learn about financial strategies and mortgage alternatives. Knowledge truly is power when it comes to your financial well-being. I’ve seen how even a basic understanding of financial concepts helps people make better decisions and feel more in control during uncertain times.

In conclusion, managing financial strain amid rising rates isn’t impossible. By implementing thoughtful budgeting strategies, seeking help when needed, staying informed about your options, and investing in your financial education, you can navigate these challenging times. Remember, proactive measures today can prevent major problems tomorrow.

7 Steps for Canadians Facing Mortgage Payment Difficulties or Mortgage Delinquencies

Over the years, I’ve worked with countless homeowners struggling to keep up with their mortgage payments. If you’re finding it hard to make ends meet, here are seven critical steps I recommend taking before the situation worsens:

1. Contact Your Lender Immediately

This is the step most people avoid, but it’s the most important one. In my experience, lenders are far more willing to work with you when you reach out before missing payments. Last year, I helped a client negotiate a short-term payment reduction after she proactively contacted her bank about an upcoming job transition.

Most Canadian financial institutions offer various hardship programs that might include:

  • Short-term payment deferrals
  • Extended amortization periods to lower monthly payments
  • Interest-only payment arrangements
  • Special repayment plans for catching up on missed payments
  • Mortgage restructuring options

Early communication demonstrates good faith and gives you access to more options than if you wait until you’re already behind.

2. Seek Professional Financial Advice

The right professional guidance can make all the difference. Consider consulting:

  • A Licensed Insolvency Trustee who can provide a comprehensive assessment of your entire financial situation and explain all your legal options
  • A non-profit credit counsellor who can help create a budget and debt management plan
  • A mortgage broker who might identify refinancing options you haven’t considered

I recently worked with a family who thought bankruptcy was their only option, but after consulting with us, they discovered a consumer proposal would allow them to keep their home while addressing their unsecured debt problems.

3. Explore Government Assistance Programs

Don’t overlook potential help from government programs. Several Canadian options may assist:

  • The First-Time Home Buyer Incentive (if eligible)
  • Provincial emergency housing benefit programs
  • Tax credits or rebates you might not be claiming
  • Employment Insurance if job loss is a factor

One client I worked with discovered they qualified for a provincial deferral program that freed up $325 monthly in their budget—enough to help them manage their mortgage payment increase.

4. Consider Formal Debt Relief Options

If your financial situation is severe, you might need to explore more structured solutions:

  • Consumer Proposal: A legally binding arrangement where you pay back a portion of your unsecured debt
  • Bankruptcy: A last resort that provides debt relief but has significant impacts on credit
  • Mortgage forbearance agreements through your lender
  • Selling your home to use the equity for a fresh start in a rental while paying down other debts

Each option has pros and cons that should be carefully weighed with professional guidance.

5. Evaluate Housing Alternatives

Sometimes the most practical solution involves making changes to your housing situation:

  • Renting out a portion of your home to generate additional income
  • Selling and downsizing to a more affordable property
  • Considering a voluntary sale to avoid foreclosure proceedings

I’ve seen how renting out a basement apartment helped one family earn an extra $1,200 monthly—enough to bridge their payment gap and keep their home.

6. Protect Your Credit Where Possible

Even during financial hardship, try to minimize damage to your credit:

  • Maintain communication with all creditors
  • Get payment arrangements in writing
  • Keep detailed records of all communications
  • Regularly monitor your credit report for accuracy

Taking these steps can make rebuilding your financial health easier once you’ve weathered the current storm.

7. Create a Strict Budget and Spending Plan

Develop what I call a “crisis budget” that:

  • Prioritizes secured debts like your mortgage
  • Eliminates all non-essential spending
  • Redirects available funds to housing costs
  • Identifies additional income opportunities

One family I worked with found an additional $475 monthly just by implementing a strict temporary budget—enough to keep them in their home while they addressed their broader financial challenges.

The most important takeaway is that proactive action significantly improves outcomes. Many Canadians successfully navigate mortgage difficulties with the right support and information. Don’t wait until you’re already behind—the sooner you take action, the more options you’ll have.

mortgage delinquencies
mortgage delinquencies

Mortgage Delinquencies: Insights for Financial Institutions

Risk Assessment and Management Strategies

Throughout my career working with both borrowers and lenders, I’ve observed that financial institutions in Ontario face increasing challenges in managing mortgage portfolios amid evolving economic conditions. Traditional risk assessment models that serve well in stable environments are proving insufficient in today’s landscape, necessitating more sophisticated approaches.

Forward-looking risk management requires lenders to implement early warning systems that detect subtle indicators of potential mortgage distress. These indicators often precede actual payment delinquency and may include:

  • Patterns of decreasing savings account balances
  • Increased utilization of revolving credit lines
  • Changes in transaction patterns showing greater reliance on credit for everyday expenses
  • Irregular payment timing even when full payments are eventually made
  • Increases in NSF incidents across banking products

The most progressive institutions I’ve worked with are incorporating these behavioural metrics into dynamic risk-scoring models that supplement traditional credit bureau data. This approach allows for more proactive intervention before a mortgage enters formal delinquency status.

Portfolio stress testing has also evolved considerably. Rather than applying uniform interest rate shocks across all mortgages, sophisticated lenders now conduct segmented stress tests that consider regional economic variations, employment sector vulnerabilities, and debt-to-income ratios specific to customer segments. This granular approach enables more targeted risk mitigation strategies.

The variable-rate mortgage segment requires particular attention in the current environment. I’ve helped financial institutions develop specialized monitoring protocols for variable-rate mortgages approaching their trigger rates. Identifying these high-risk scenarios and initiating contact with affected borrowers before payment disruptions occur can significantly reduce default rates.

For mortgages already showing signs of stress, a graduated response framework that includes multiple intervention options beyond the binary choices of foreclosure or maintaining the status quo has proven most effective. These might include:

  • Term extensions to reduce monthly payment obligations
  • Interest rate modifications for temporary hardship cases
  • Principal forbearance options with catch-up provisions
  • Targeted refinancing programs for qualified borrowers

Institutions that develop comprehensive, flexible approaches to mortgage distress will not only minimize losses but also maintain stronger customer relationships through difficult economic cycles.

Importance of Customer Outreach and Support

Proactive customer engagement has emerged as a critical factor in managing mortgage delinquency. My research and experience consistently demonstrate that early, empathetic communication with borrowers facing financial challenges significantly improves outcomes for both customers and financial institutions.

Effective customer outreach programs should be initiated before formal delinquency occurs. Data analytics can identify customers exhibiting early warning signs of financial stress, allowing institutions to initiate supportive communication framed as financial wellness check-ins rather than collections activities. This approach reduces the stigma associated with financial difficulty and increases customer receptivity.

Financial literacy support represents another valuable intervention strategy. Many borrowers experiencing payment challenges benefit from education regarding:

  • Budgeting techniques during inflationary periods
  • Strategies to prioritize debts effectively
  • Available government assistance programs
  • Options for mortgage modification
  • Long-term consequences of various financial decisions

Institutions that provide these educational resources demonstrate commitment to customer success while simultaneously improving repayment outcomes.

Communication channels and timing also significantly impact customer engagement effectiveness. Multi-channel approaches that combine traditional methods (letters, phone calls) with digital touchpoints (secure messaging, mobile app notifications, email) show higher response rates than single-channel strategies. Additionally, institutions should analyze customer behavioural data to identify optimal contact times that increase the likelihood of meaningful engagement.

When developing specialized support teams for mortgage assistance, training should emphasize both technical knowledge and emotional intelligence. Staff members who can explain complex financial concepts while demonstrating genuine empathy create more productive interactions with customers facing financial stress.

Financial institutions should also consider implementing dedicated mortgage modification specialists who can rapidly assess customer situations and offer appropriate solutions. These specialists require the authority to approve reasonable modifications without excessive approval layers that can delay assistance until a customer’s situation has deteriorated further.

The reputational benefits of effective customer support during financial hardship should not be underestimated. Institutions that demonstrate a genuine commitment to helping customers navigate difficult periods build lasting loyalty that extends beyond the mortgage relationship.

Frequently Asked Questions: Ontario’s Mortgage Crisis

What is the current state of mortgage delinquencies in Ontario?

Ontario is experiencing an alarming surge in mortgage delinquencies. As of Q4 2024, over 11,000 Ontario mortgages are delinquent (meaning at least one missed payment). This represents nearly triple the number recorded in 2022 and a 50% increase compared to pre-pandemic levels. Most concerning is the 90% increase in homeowners falling behind on mortgage payments by 90 days or more—a trend outpacing similar situations in Quebec and British Columbia.

What factors are driving the rise in Ontario mortgage delinquencies?

The current mortgage crisis in Ontario stems from several interconnected factors:

  • Interest rate increases: The rapid rise in rates has dramatically increased monthly payments, particularly for variable-rate mortgage holders
  • Pandemic-era purchasing decisions: High home prices during the pandemic, combined with more flexible underwriting standards, left many homeowners overextended
  • Rising consumer debt burdens: Inflation has driven up costs for necessities, making it increasingly difficult for homeowners to prioritize mortgage payments
  • Employment challenges: Shifting employment trends have further complicated homeowners’ ability to maintain consistent payments
  • Cumulative inflation effects: Prolonged inflation has eroded household purchasing power, affecting overall financial stability

What’s the difference between mortgage delinquency and default in Ontario?

Mortgage Delinquency:

  • Occurs when a payment is missed or not made in full by the due date
  • Most Ontario lenders provide a grace period (typically 15 days) before officially marking a mortgage as delinquent
  • Results in credit reporting damage, late fees, and preliminary collection activities

Mortgage Default:

  • More serious condition occurring after prolonged non-compliance (typically 90+ days past due)
  • Triggers a formal Notice of Default from the lender
  • This can lead to power of sale proceedings where the lender sells the property
  • This may result in the acceleration of the entire mortgage balance
  • This can lead to property seizure and potential deficiency judgments if the sale doesn’t cover outstanding debt
  • Causes significant long-term damage to credit scores and borrowing capacity

How will impending mortgage renewals affect Ontario homeowners?

Ontario faces a significant mortgage renewal challenge in 2025, with over 1 million mortgages due for renewal. Many of these were secured when interest rates were below 1%. With the Bank of Canada’s overnight rate now at 3%, homeowners face substantially higher monthly payments. Industry estimates suggest approximately 25% of Ontario homeowners will experience increases of at least $150 per month, with some facing $300-$500 or more in additional monthly costs.

What steps should Ontario homeowners take to prepare for mortgage renewal?

Homeowners approaching renewal should:

  • Review their current mortgage terms and understand their options
  • Seek professional financial advice from mortgage brokers or financial advisors familiar with Ontario’s market
  • Explore deferral programs offered by their specific lender
  • Consider family support options if available
  • Adjust household budgets to accommodate potential payment increases
  • Begin planning 6-12 months before renewal to maximize preparation time
  • Compare rates across multiple lenders rather than automatically renewing with their current institution

What practical strategies can help manage financial strain amid rising mortgage rates?

Ontario homeowners facing financial pressure should consider:

  • Comprehensive budgeting: Track all income and expenses, distinguish needs from wants, and set realistic spending targets tailored to current financial reality
  • Professional financial consultation: Seek advice from Ontario-based financial advisors who understand the provincial housing landscape
  • Explore lender programs: Many Ontario lenders offer hardship or deferral programs specific to the current market conditions
  • Support networks: Don’t hesitate to discuss options with family members who might offer temporary assistance
  • Mortgage restructuring: Consider extending amortization periods or exploring alternative mortgage products that might reduce monthly payment obligations

What formal debt relief options exist for struggling Ontario homeowners?

When financial challenges become severe, Ontario homeowners should explore structured solutions:

  • Consumer proposals: Legally binding arrangements through a Licensed Insolvency Trustee to repay a portion of unsecured debt while protecting your home
  • Bankruptcy protection: A last resort with significant credit implications, but which provides a fresh start when other options aren’t viable
  • Mortgage forbearance: Temporary payment relief arrangements negotiated directly with your lender
  • Strategic property disposition: Selling your home to utilize equity before facing the power of sale proceedings
  • Ontario’s Landlord and Tenant Board processes: Understanding options if converting to a rental property with secondary suites to generate income

What immediate steps should homeowners take when struggling with mortgage payments?

If you’re facing payment difficulties:

  1. Contact your lender before missing any payments—proactive communication significantly increases available options.
  2. Document your financial situation clearly to present to your lender.
  3. Consult with a Licensed Insolvency Trustee or non-profit credit counsellor in Ontario.
  4. Explore lender hardship programs that may include payment deferrals, extended amortization periods, or interest-only arrangements.
  5. Prepare a realistic budget showing your capacity to manage modified payment arrangements.

How can financial institutions better support Ontario customers facing mortgage difficulties?

Financial institutions serving Ontario can improve their response through:

  • Implementing early warning systems to detect signs of mortgage distress specific to Ontario’s market.
  • Conducting regionally-focused stress tests that account for Ontario’s unique housing dynamics.
  • Developing specialized monitoring for variable-rate mortgages approaching trigger rates.
  • Creating graduated response frameworks including term extensions and interest modifications.
  • Offering principal forbearance and targeted refinancing programs.
  • Enhancing proactive customer engagement before delinquency occurs.
  • Providing Ontario-specific financial literacy resources.
  • Training staff in empathetic communication techniques for difficult financial conversations.

Mortgage Delinquencies: Conclusion

Ontario’s mortgage delinquency rates continue their troubling climb, with over 11,000 mortgages failing to meet payments in Q4 2024 alone. Throughout this post, I’ve explored the various causes behind this crisis, shared individual stories from people I’ve worked with, and provided practical advice for navigating these challenging financial waters.

I hope you’ve found this exploration of mortgage delinquencies helpful. If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance.

At the Ira Smith Team, we understand both the financial and emotional components of debt struggles. We’ve seen how traditional approaches often fall short in today’s economic environment, which is why we focus on modern debt relief options that can help you avoid bankruptcy while still achieving financial freedom.

The stress of financial challenges can be overwhelming. We take the time to understand your unique situation and develop customized strategies that address both your financial needs and emotional wellbeing. There’s no “one-size-fits-all” approach here—your financial solution should be as unique as the challenges you’re facing.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. We’re committed to helping you or your company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

The information provided in this blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc., and any contributors do not assume any liability for any loss or damage.

mortgage delinquencies
mortgage delinquencies
Categories
Brandon Blog Post

NAVIGATING THE DISTRESS SALE: OPPORTUNITIES AND CHALLENGES IN THE CHAOTIC CANADIAN REAL ESTATE MARKET

There Is A Surge in Distress Sales of Real Estate

Canada’s commercial and industrial real estate market is evolving and not in a good way. One particularly striking trend catches my attention: the surge in distressed real estate sales. In the first half of 2024, a whopping $803 million in distressed commercial real estate sales were recorded. This figure is not just significant; it’s more than double the amount seen during the previous year’s period.

Allow me to share some insights on what’s driving this increase in the distress sale of commercial, industrial and development real estate, along with my experiences observing these changes first-hand.

What qualifies as Distressed Sale Transactions?

As a licensed insolvency trustee, I’ve seen a significant increase in distressed real estate sales in Canada. But what exactly is a distressed sale? In simple terms, a distressed sale is when a property is sold, often at a lower price than the appraised value, due to financial difficulties or other urgent circumstances.

When a property owner is struggling to make mortgage payments or is facing financial hardship, they might need to sell their property quickly to avoid a mortgage lender or other secured creditor enforcement action through a power of sale home or property action. Alternatively, the secured creditor may have appointed a receiver to sell the property. The market will recognize this as a distress sale.

distress sale
distress sale

Reasons for Distress Sales

There are various reasons for distress sales.

Homeowners may face financial challenges due to various factors, including job loss, medical emergencies, or divorce. Additionally, over-leveraging can occur when property owners incur excessive debt, making it difficult for them to fulfill their mortgage obligations and making it more likely to default under the mortgage agreement. Market fluctuations, particularly a sudden decline in property values, often exacerbate these issues, compelling owners to sell their properties in an unfavourable market.

As a licensed insolvency trustee, I have witnessed many of these common situations and the significant effects that financial difficulties can have on property owners. It is crucial for individuals experiencing such challenges to seek professional guidance. Whether considering a distressed sale or a traditional sale, I am here to provide the necessary support and advice.

Advantages of Buying Distress Sale Properties

Taking advantage of distressed property sales can lead to a good deal. But what are the benefits of buying a distressed property? Here are some of the advantages to consider:

  1. Lower Purchase Price

The most obvious advantage of buying a distressed property is the lower purchase price. When a property is sold in a distress sale, the seller will accept a lower price to avoid further financial losses or to get out of a loan gone bad, especially when the lender takes into account the time value of money.

  1. Opportunity to Improve and Flip

Distressed properties often need some work, which can be a great opportunity for investors who are looking to renovate and flip the property for a profit. With a lower purchase price, you can invest in renovations and still make a profit when you sell the property.

  1. Potential for Higher Rental Income

If you’re looking to rent out the property, a distressed property can be a great opportunity. With a lower purchase price, you can offer a more competitive rent and attract more tenants. Plus, the property may need some work, which can be a great opportunity to increase the property’s value and rental income.

  1. Less Competition

Under a distress sale, there could be less competition from other buyers. This can be a huge advantage, especially in a hot real estate market where multiple offers are common. With less competition, you may have a better chance of getting the property at a price that works for you.

  1. Opportunity for Negotiation

In situations where a property is being sold under distress, there often exists a greater potential for price negotiation. This presents an advantageous opportunity for buyers to secure a more favourable deal on the property. As a buyer, you may be able to negotiate a reduced purchase price or potentially persuade the seller to include additional benefits, such as offering below-market-rate financing.

  1. Potential for Long-Term Appreciation

Although the property may require some renovations, it presents a significant opportunity for long-term investment. With a lower acquisition cost, you can maintain ownership of the property over an extended period and benefit from its potential appreciation in value.

  1. Opportunity to Generate Equity

Investing in a distressed property presents a unique opportunity to rapidly build equity through renovations that enhance the property’s value. This approach can serve as an effective strategy for wealth accumulation and contribute to long-term financial stability.

distress sale
distress sale

Risks Associated with Distress Sales

Acquiring a distressed property can present a valuable investment opportunity; however, it is crucial to remain cognizant of the potential risks involved in such transactions. As a licensed insolvency trustee, I have observed numerous individuals who were unprepared for the challenges that accompany the purchase of distressed properties. Below are several key risks to consider:

  • Hidden Defects

When a property is sold in distress, it often arises out of a situation where the owner has financial problems. This can mean that they may not have had the time or resources to fix any defects or issues with the property. In a secured creditor enforcement action, the mortgagee or receiver may not even be aware of the hidden defects. As a buyer, you may be taking on the risk of hidden defects, such as structural problems, water damage, or pest infestations. So due diligence is very important whenever looking to be a buyer from a distress sale situation.

  • Unpaid Taxes and Liens

When a property owner is struggling to make payments, they may not have paid their property taxes or other bills on time. This can result in unpaid taxes and liens on the property, which can be a major headache for the buyer. As a buyer, you may be responsible for paying off these debts, which can add up quickly. Legal due diligence is necessary to identify such additional costs before making your offer to purchase the distress sale property

  • Unreliable Seller

When a property owner is selling in distress, they may not be in the best position to provide accurate information about the property. As a buyer, you may not be able to rely on the seller’s representations about the property’s condition, and certainly not any warranties they may give. You must do your due diligence to uncover any potential issues.

  • Increased Maintenance Expenditures

Distressed properties frequently require significant repairs and renovations, which can prove to be both costly and time-intensive. As a prospective buyer, it is essential to allocate a budget for these potential expenses, as they can accumulate rapidly. It is advisable to factor these costs into your purchasing analysis.

  • Considerations Regarding Environmental Hazards

Properties constructed before modern safety regulations may present various environmental hazards, including asbestos, lead-based paint, and mold. The remediation of these issues can be expensive and complex. As a potential buyer, it is essential to recognize that assuming ownership of such properties may involve significant risks that could affect both your health and the overall value of the property. Conducting thorough environmental due diligence is imperative to fully assess any potential exposure associated with acquiring a property that may be environmentally compromised.

Overview of Sales Statistics in Canada

The meteoric rise in distressed asset sales reflects a growing concern among developers and investors alike. According to recent reports from Colliers International, there were 137 construction and real estate receiverships in the first half of 2024 alone—an average of 23 per month! It’s evident that the landscape isn’t just shifting; it’s undergoing a fundamental transformation, largely influenced by soaring borrowing costs and mounting pressure on real estate companies to meet their financial obligations.

This significant uptick highlights a market in distress, which often paves the path for investors looking to capitalize on these properties. However, the challenge remains: buyers are often deterred by what they perceive as inflated asking prices. There seems to be a notable mismatch currently between what sellers believe their assets are worth and what buyers are willing to pay, making negotiations tough.

distress sale
distress sale

Factors Contributing to Increased Distressed Property Listings

Several factors can be pointed out as contributors to this rising trend in distressed property listings:

  • Bankruptcy and Receiverships: A growing number of developers are filing for bankruptcy protection, which has led financial institutions to ultimately assert more control over projects, often pushing them into receivership.
  • High Borrowing Costs: Properties that once seemed financially viable are becoming liabilities as interest rates climb. Many builders and owners are simply unable to keep up with their loan repayments.
  • Market Sentiment: Certain observers note that buyers are continuously looking for opportunities, akin to ‘smelling blood in the water.’ There’s a hunger for good deals, but sellers remain reluctant to accept prices that align with current market realities.

This captures the essence of the predicament. Sellers, often stuck in bygone appraisals, are left with unrealistic price expectations that serve as barriers to successful transactions.

Distress Sale Anecdotes

I am involved in distress sales of real estate acting as both a licensed insolvency trustee and in estate trustee assignments. Building defects, increasing vacancies and abandoned developments are all part of the distressed property package. Property management signs and bailiff notices dot the landscape more these days.

My conversations with industry insiders bring to light the escalating frequency of lenders reaching out for guidance amid this turmoil. Mike Czestochowski of CBRE Group, mentioned that inquiries about distressed properties have surged. This points to a market that’s rapidly changing and creating a growing demand for seasoned expertise.

Regrettably, a significant majority of these distressed properties are difficult to position or market effectively due to the previously mentioned pricing disconnect. For instance, I learned from a broker that one distressed project in Toronto was circulated among 6,217 potential buyers, yet only one formal offer materialized, drastically lower than the expected price.

distress sale
distress sale

The Overall Distress Sale Market Landscape

Brokers are feeling the heat as they work harder to connect with potential buyers, canvassing multiple avenues to drive interest in distressed assets. The reality is that while the market is presenting a myriad of buying opportunities, many properties fail to meet the essential criteria that savvy investors seek.

To add context, many developers, including Minto Group, are cautious about their acquisitions. They are inundated with pitches for distress sale of properties but tend to pass because they prioritize quality and clear project approvals over taking control of someone else’s incomplete vision. Options like unfinished condo projects or properties deep in the throes of receivership aren’t what they want in their pipeline unless the opportunity is extraordinarily favourable.

The current pivot in market dynamics emphasizes a need for alignment between buyer and seller expectations. With owners and lenders slow to reduce prices, many may risk letting valuable assets languish on the market as they hold out for higher valuations, further stalling transactions. The first half of 2024 has showcased the pitfalls of an out-of-sync market where both sides must adapt to traverse these choppy waters effectively.

As I continue to observe this evolving market, it’s clear the distress sale portion of the real estate market represents both a challenge and an opportunity. Whether this trend will lead to new heights or further declines remains to be seen, but it certainly sets the stage for an intriguing chapter ahead in Canada’s commercial real estate landscape.

Distress Sale: Disconnect Between Buyer and Seller Expectations

In the volatile world of real estate, I’ve personally observed a troubling trend that seems to plague negotiations: the stark disconnect between what buyers believe what current fair market value is and what sellers expect to receive for their properties. This mismatch often leads to frustration on both sides and does not allow for a true market price to be established, especially in a market that is continuously shifting.

Many buyers today are on the hunt for deep discounts. It’s almost as if they’re wearing superhero capes, eager to swoop in on properties marketed as distressed. On the flip side, asset owner sellers are often clinging to outdated evaluations of their properties, relying heavily on appraisals that may be anywhere from one to three years old – an eternity in a rapidly changing market. This disconnect can result in properties languishing unsold for extended periods, as buyers and sellers talk past each other while sitting at the negotiation table.

Reflecting on my own experiences in property negotiations during challenging market conditions drives home just how significant this disconnect can be. There was a time when I was involved in a tough sale where the owner invested significantly in a commercial property.

Despite the evident market shifts, they, and the 2nd and 3rd mortgagees who ranked after my 1st mortgagee client, were resolutely convinced that the valuation from their last appraisal two years prior was still valid.

Meanwhile, only one potential buyer surfaced, who was desperate to squeeze every dollar, and was offering an amount drastically below the asking price representing two-thirds of our appraised value 6 months earlier! It was like two trains on different tracks that weren’t going to meet anytime soon.

Thankfully, we were a court-appointed receiver. We presented our evidence as to the lengthy and well-advertised sales process we undertook and the only party who was willing to purchase the property. The 1st mortgagee supported the sale, even though it was going to suffer a shortfall.

The 2nd and 3rd mortgagees opposed, but had no evidence to offer that their position was correct. They also were not prepared to purchase the property or otherwise pay out the 1st mortgage. The court approved our application and we completed the sale of the property.

distress sale
distress sale

Distress Sale: The Statistics Speak Volumes

Data from reputable sources paints a clear picture of this disconnect. For instance, statistics reveal that in the first 6 months of 2024, there is an alarming average of 22 real estate receiverships each month across Canada, showcasing the number of projects being forced into financial distress due to market pressures.

Month

Number of Receiverships

January

22

February

20

March

24

April

25

May

23

June

19

What does this mean for buyers? It suggests a competitive landscape where buyers need to act quickly—but it also reveals a passive attitude from sellers who are not adapting to current realities. The bruising truth is that many of these listings may never find a buyer if the asset owner sellers maintain their lofty ideals. In some cases, it the reality of today’s real estate market may mean that the real current market value will mean owners are selling at loss, which they are trying desperately not to do.

“Sellers are still clinging on to these appraisals from five years ago with unrealistic valuations of their property.” – Jeremiah Shamess, Colliers Private Capital Investment Group

Distress Sale: Real Stories and Real Struggles

In an anecdote that stays with me, I am aware of a party who owned a struggling retail space. After investing considerably in its renovation, they insisted on a selling price from an appraisal on a post-renovation basis. Since the market had shifted, buyers were more cautious.

The property lingered on the market while potential buyers flitted away, citing inflated pricing as their reason for walking. After a few months, reality hit—the price had to drop, and a stark realization set in – without compromise, the owner would lose the opportunity to sell the property.

This disconnect doesn’t just stop at the financial implications; it also has emotional repercussions. Buyers often feel a sense of despair finding properties that pique their interest only to discover the asking price is out of reach and out of touch with today’s reality. Conversely, sellers face anxiety over their investments, fearing they must let go of something they believe is worth more. It’s a painful dance where no one wants to take the first step toward compromise.

distress sale
distress sale

The Bigger Distress Sale Picture

When I turn my attention to the broader landscape, I see a trend where defaults are expected to increase, leading to even more troubled properties hitting the market. The environment is ripe for change, yet if buyers seek deals while sellers persist with unrealistic expectations, we may continue to see more properties fall into this “no man’s land.”

From my perspective, the only way to foster meaningful negotiations in this climate is to cultivate a greater willingness on both sides to communicate openly about their expectations. While buyers need to come to terms with market realities, sellers must also reevaluate their prices based on current valuations rather than past appraisals.

In a nutshell, both parties must strive to meet somewhere in the middle, creating a healthier negotiating environment that acknowledges the shifting market dynamics. From personal experience, I can assert that these discussions, though challenging, often lead to more fruitful outcomes when both parties approach the table with a willingness to adjust and accommodate.

As I look at the current landscape of distressed properties, it’s hard to ignore the shifting tides in the real estate market. With an increasing number of distressed commercial properties available and a rise in defaults, especially in Canada, potential buyers might be feeling a mix of excitement and uncertainty. The conversation surrounding the future trends of distressed property sales feels even more relevant now as we head into the latter half of 2024 and beyond.

During the first half of 2024 alone, sales of distressed commercial properties reached an impressive $803 million, doubling the figures from the previous year. This surge perhaps signifies that more sellers are willing to part with their troubled assets as borrowing conditions tighten and financial pressures rise. I can’t help but feel there’s an underlying opportunity here for savvy investors.

The divergence in buyer and seller expectations could lead to stagnation in transactions unless both parties converge on a mutual understanding of the property’s value. I’ve seen this play out in countless situations.

For instance, I know of one project that was marketed to over 6,000 potential buyers, but despite interest, only one valid offer materialized, significantly below the lender’s expected price. This scenario exemplifies the challenges that buyers face in securing such assets at prices that reflect current market realities.

distress sale
distress sale

Understanding Potential Distress Sale Opportunities

I suspect there will be an uptick in real estate receiverships as lenders increasingly lose confidence and may push projects into receivership as they tighten their grip on risk. I can only imagine how tough this transition must be for developers who suddenly find their projects in jeopardy.

What fascinates me about this situation is the potential for opportunity amidst what seems like chaos. With the number of distressed properties likely to increase, those with a keen eye for undervalued assets may find hidden gems.

I envision a hypothetical investor who sees value where others see risk. They purchase a property, perhaps a distressed condo or an unfinished building, and invest the time and resources to revitalize it. This savvy move could pay off tremendously down the line.

Keys to Success in Distressed Property Investment

For those interested in venturing into the world of distressed properties, adopting a well-informed investment strategy is crucial. Here are some elements I believe could serve as essential guidelines:

  1. Research Extensively: Understanding current market conditions and trends is vital. Knowledge about the region’s economic health can inform decisions on whether to invest in a particular property type.
  2. Engage with Experts: Networking with real estate professionals and restructuring experts can offer insights into what to expect as the market evolves.
  3. Be Flexible: The ability to adapt your strategy in response to changing conditions could make a significant difference in your success.
  4. Value Evaluation: Develop a clear understanding of realistic valuations. Investing in properties at reasonable prices, even if they require renovation or revitalization, can mitigate risk.

As the market adjusts, those willing to research, strategize, and maintain a clear vision may find themselves on the winning side. It’s an exhilarating time in the real estate world, filled with potential opportunities, if one knows where to look.

In summary, the future of distressed property sales appears robust yet challenging. Increased receiverships and shifting market dynamics promise a highly variable landscape. As a prospective investor, understanding these trends and thoughtfully navigating the market can lead to rewarding opportunities.

distress sale
distress sale

Distress Sale Conclusion

I hope you enjoyed this distress sale Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring due to distressed real estate or other reasons? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or someone with too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

distress sale
distress sale
Categories
Brandon Blog Post

WHAT HAPPENS TO YOUR MORTGAGE WHEN YOU DIE? OUR AWESOME COMPREHENSIVE GUIDE FOR CANADIANS

What happens to your mortgage when you die? Introduction

There comes a time in everyone’s life when we must face the inevitable truth of our very own death. While it may not be the most pleasant topic to discuss, it is vital to consider the financial ramifications that may arise after we die. Specifically, have you ever questioned what occurs to your home mortgage loan when you pass away in Canada? In this Brandon’s Blog, we will explore this important topic, clarifying the function of beneficiaries, mortgage protection insurance, as well as estate preparation in addressing what happens to your mortgage when you die.

When a loved one passes away, the problem of dealing with their assets, liabilities, and all financial issues falls upon the shoulders of one or more of their survivors. One of the most substantial issues among all the types of debts the deceased may have had is the remaining mortgage loan balance and how it will be managed. Will your beneficiaries inherit this financial obligation, or can it be removed through specific processes? Feel confident, we will certainly provide you with valuable information as well as the positive steps to guarantee your legacy continues to be secure.

Comprehending the function of beneficiaries in mortgage affairs is of utmost importance. There is a way during your lifetime that you can shield your loved ones from acquiring the concern of your financial commitments. We will certainly guide you with the details of beneficiary classification, helping you move through the needed paperwork to choose the most ideal option(s) for your particular situation.

In addition, we will explore the essential role of life insurance coverage in the context of mortgages after death. A life insurance policy can function as a financial safety net that not just covers funeral expenditures yet can also be used to settle your mortgage debt. We will review various sorts of life insurance policy plans and their benefits, enabling you to make knowledgeable choices that protect your loved ones from unnecessary financial pressure.

Lastly, we will certainly explore the value of estate preparation in ensuring a smooth transition of your home, your other possessions and your mortgage. Appropriate estate planning allows you to manage just how your assets are dispersed, including your home mortgage. We will walk you through the elements to take into consideration when developing an estate strategy, such as creating a trust or thinking about joint ownership, providing you with the tools to secure your heritage and also supplying financial safety and security to your loved ones. We will discuss all the concepts but what we won’t talk about is how to draft your Will. That is a discussion you need to have with your lawyer.

Now is the time to gain a detailed understanding of what happens to your mortgage when you die in Canada. By taking proactive steps, you can safeguard your loved ones from a prospective financial concern and make sure a smooth changeover for your estate. Join us as we delve into this subject, supplying our thoughts and guidance to assist you in securing your legacy. Read more now!

What happens to your mortgage when you die? Understanding the basics of a mortgage

Defining a mortgage and its key components

A mortgage is a financial contract in which a mortgage lender offers funds to a consumer to acquire a property. It consists of numerous vital parts, such as the funding amount, rates of interest, payment duration, and regular monthly installments. Comprehending these elements is necessary to realize what occurs to a mortgage when you pass away. It is vital to acknowledge that the responsibility for making the monthly mortgage payments lies with the consumer, despite their life conditions. Nonetheless, there are actions you can take to protect your loved ones from the problem of a mortgage obligation after your death, including beneficiary classification, life insurance, and estate planning.

Understanding the Basics of a Mortgage

To grasp the ins and outs of what happens to your mortgage when you die, it is essential to initially understand the basics of a mortgage and your specific mortgage document. This section intends to supply a clear description of regular mortgage conditions. By familiarizing themselves with these terms, individuals can better navigate the complexities of the home mortgage process. People need to fully understand everything about their mortgage, including, the rate of interest and payment schedule, insurance policy requirements and penalties for defaulting, to be able to plan your estate properly. By acquiring a strong understanding of the essentials, readers can have self-confidence when considering their estate options.

The role of a co-borrower or co-signer

When it involves mortgages, understanding the role of a co-borrower or co-signer is critical as there is a difference if there was just a sole owner responsible for the mortgage obligation. A co-borrower is somebody that authorizes the mortgage contract as well as shares equivalent responsibility for the mortgage loan.

They have possession rights over the home and are just as accountable for making the mortgage loan repayments. On the other hand, a co-signer is someone that gives their credit reliability to help secure the loan but does not have any type of ownership legal rights. They are only responsible for the payments if the primary borrower stops making the payments.

Having a co-borrower or co-signer can provide extra security for the lending institution as well as may improve the opportunities for lending approval.

what happens to your mortgage when you die
what happens to your mortgage when you die

What happens to your mortgage when you die? The impact of death on a mortgage

Exploring the implications of death on mortgage payments

When a house owner dies, their home loan doesn’t simply disappear. The lender still has a lawful right to the home until the mortgage is paid off. If the mortgage remained in the property owner’s name alone, the estate will require to repay the balance. This can be done by selling the building or making use of funds from the estate.

If the mortgage was jointly held because there is a joint owner of a property, the surviving co-borrower will take control of the obligation of making the regular monthly payments, assuming they can afford to do so on their own. It is necessary to plan for the effect of death on a home mortgage loan by thinking about life insurance and your will to make sure that loved ones are not strained with mortgage payments after a house owner passes away.

Discussing the lender’s rights and options in such scenarios

When it pertains to what happens to your mortgage when you die, it is essential to recognize the rights and also choices of the loan provider. In such situations, lending institutions have the right to examine the situation and make a choice concerning the mortgage loan. They can choose to accelerate the loan and demand the need for instant payment or they can allow the surviving co-borrower to continue making payments.

In Ontario, lenders have the option to initiate the power of sale proceedings if the mortgage falls into arrears. It is important to be familiar with these options and plan for them when you are alive to protect your estate.

Sale clause in a mortgage agreement

In every standard mortgage, there is a sale clause. This stands as a typical provision included in the majority of mortgage contracts. This provision empowers the lender to demand complete repayment of the mortgage balance in the event of a property sale. The sale clause aims to safeguard the lender’s stake in the property since they have invested a substantial amount in the mortgage.

For borrowers, it becomes crucial to grasp the terms of their mortgage agreement and the possible ramifications of triggering the sale clause. Should a borrower intend to sell their property, seeking consultation with their lender becomes imperative to ascertain the terms and conditions required to steer clear of triggering the sale clause.

What happens to your mortgage when you die? Outlining the options available to settle a mortgage after death

When managing to settle a mortgage debt after death of the borrower, there are 2 choices offered to Canadians:

  1. Pay off the balance of the mortgage utilizing life insurance plan proceeds. Making certain that you have appropriate mortgage loan insurance in place permits you to utilize those funds for home mortgage payments, alleviating the worry of the family members you left behind.
  2. Another choice involves the estate of the deceased person. Depending on the conditions, the estate may have the capability to cover the mortgage loan by making use of other assets.

It’s essential to extensively think about these choices and consult estate planning professionals to make certain you protect your loved ones by adequately covering this financial debt.

Exploring the possibility of paying off the mortgage using life insurance proceeds

When it involves what happens to your mortgage when you die in Canada, one possibility is to explore using a life insurance plan to pay off the home mortgage loan balance. By having a life insurance plan in place, you can make use of the funds to repay the loan, thereby saving your family from that financial stress. This can be either a separate life insurance policy or specific mortgage insurance offered by the lender. You should carefully check out both types, as costs and qualifying for each type could vary significantly.

This enables them to save residential real estate without the obligation of a mortgage loan. Participating in this proactive method demonstrates a degree of financial responsibility and insight, ensuring your family members’ security and also safeguarding your legacy. Consider reviewing this choice with an experienced financial expert to evaluate the possibility of obtaining such insurance policy protection as well as understanding what the insurance premiums will be.

The role of the deceased individual’s estate in mortgage settlement

When considering what takes place on your mortgage loan upon your demise, recognizing the function of the departed person’s estate in mortgage settlement is critical. The estate, encompassing the dead person’s properties as well as obligations, plays an important part in identifying just how the mortgage will be settled. This may require selling off the property or selling off various other assets of the estate to raise funds for clearing the mortgage loan balance.

It is essential to have a well-prepared estate plan to make certain a seamless strategy for your Estate Trustee to follow, benefitting your beneficiaries and family after your passing away. Seeking support from legal and financial experts can assist navigate you with this process.

what happens to your mortgage when you die
what happens to your mortgage when you die

What happens to your mortgage when you die? Transferring the mortgage to another party

The concern surrounding your home mortgage’s destiny after your passing presents a possibility to plan ahead of time for the transfer of ownership to a loved one while at the same time knowing that the house will be protected and transferred according to your wishes. This mortgage transfer requires considering legal and financial elements and preparing the required documentation. This will require experienced guidance to navigate the procedure with the utmost skill.

Experts fluent in this area can assist with preparation, giving detailed guidance on the necessary actions while offering beneficial insights right into possible obstacles that may develop. By planning ahead of time for the transfer of both the mortgage as well as the property, you can protect your loved ones from the burden of needing to deal with this added burden after you are gone, ensuring financial safety and convenience.

The transfer of a mortgage following your death necessitates careful consideration of possible obstacles as well as legal and financial repercussions. You need to account for various elements, such as guaranteeing the prospective borrowers fulfill the loan provider’s requirements for assuming the home mortgage, in addition to fulfilling different obligations, such as making sure that the appropriate registry is updated and all necessary parties are alerted to the change of ownership.

In the context of what happens to your mortgage when you die, looking for specialist guidance for your planning is essential to make sure a smooth transfer of both the property and the mortgage happens after your death. The intricacy and also ins and outs involved in transferring both the mortgage obligation and its connected property can be overwhelming and challenging for the majority of individuals.

By getting in touch with seasoned specialists, you can guarantee a smooth and dependable change. These specialists have the needed expertise to navigate any prospective obstacles, using tailored options to match your special situation and assist in completing a smooth and orderly process easily when the time comes.

What happens to your mortgage when you die? Joint mortgages and death

For your basic estate planning when you are a joint mortgage borrower, understanding the complexities involved in a joint mortgage for the surviving borrower holds paramount relevance. Upon the death of one of the joint mortgagors, the remaining borrower might run into various issues with the mortgagee that were not anticipated. The obvious issue will be the ability of the remaining borrower to make all necessary mortgage payments without the joint borrower being alive to continue contributing. There will also be certain administrative details such as assuming sole possession of the property. If the remaining borrower cannot afford to keep the property, then marketing it to settle the mortgage debt is an obvious solution.

To proactively plan for this situation, both borrowers need to have an agreement and a plan in place as to what will happen upon the death of one of the joint borrowers. Seeking guidance from an estate planning expert is well-advised. By looking for professional recommendations, you can get a clear and detailed understanding of your legal rights and also obligations, thereby allowing you to choose the optimal course of action to safeguard the situation for both your joint borrower and your beneficiaries.

In such scenarios, it comes to be critical to confer with your lawyer to ensure the solution of a well-crafted strategy that meets everyone’s requirements. Thorough estate planning is of the utmost value. Protecting your interest in the property and also making sure the seamless transfer of your mortgage upon your death needs a comprehensive plan, including the relevance of your will.

what happens to your mortgage when you die
what happens to your mortgage when you die

What happens to your mortgage when you die? Importance of estate planning

Discovering the utilization of wills, trusts, and other legal strategies is pivotal in safeguarding your mortgaged property in the event of your passing. These tools allow for proper estate planning. A diligently prepared will certainly makes certain that your mortgaged property is duly resolved, assuring the protection of your loved ones from problems after you are gone.

Additionally, should the family situation be such that added protection is necessary, the use of a trust can offer added security by selecting a trustee to manage the property as well as disperse funds for mortgage payments. This is especially useful either where a minor child is involved or the adult child beneficiary may not be able to properly handle all aspects of property ownership.

Seasoned professionals can focus on these intricacies as well as can adeptly lead you through the procedure, assuring the protection of your legacy. In Canada, proper estate planning holds the utmost significance when a mortgage is also attached to the property, particularly when pondering the fate of the home and the mortgage after death. To navigate the complicated legal terrain, involving the services of a professional estate planner and lawyer becomes crucial.

What happens to your mortgage when you die? Conclusion

Recognizing what happens to your mortgage when you die in Canada holds vital relevance. This knowledge proves important in protecting your loved ones and cementing your legacy. Beneficiaries will be considerably affected by the ongoing mortgage obligations following your death. However, relying only on beneficiaries might prove insufficient or inappropriate.

To make sure extra safety and security and to ease the economic concerns after you are gone, it is advised to invest either in a life insurance policy as well as participating in thoughtful estate planning. By gaining valuable insights and taking aggressive steps, you can make certain that your mortgage won’t end up being an encumbrance rather than an ongoing way that your property will be protected and available for your beneficiaries.

I hope you enjoyed this what happens to your mortgage when you die Brandon’s Blog. In our role as a licensed insolvency trustee, we have had to administer the bankruptcy of many insolvent deceased estates. But what about when the deceased estate is not insolvent but there are other seemingly insurmountable problems?

That is why several years ago, we opened up a division of Ira Smith Trustee & Receiver Inc. called Smith Estate Trustee Ontario. We act as Estate Trustees for solvent estates where various problems arise requiring the appointment of an independent Estate Trustee. Some of the reasons why this service is necessary are:

  1. There is no will so the person died intestate.
  2. There is a will but the Estate Trustee(s) named in the will do not wish to act so they recuse themself(ves).
  3. Ongoing litigation makes it a requirement that an independent Estate Trustee be appointed to safeguard and liquidate the assets while litigation continues or until a settlement is reached.

As the independent Estate Trustee, we provide solutions for complex estate issues to end the pain and frustration the stakeholders are experiencing. We apply our expertise and creative thinking to take care of all details to end your pain and achieve the goals of the beneficiaries and other stakeholders.

We saw there was a need for an Estate Trustee, Executor/Executrix service that was much more than just the impersonal statutory walk-through offered by a large financial institution. We saw that not every person nominated to act as an estate trustee under a will has the desire or the skill set to handle the situation.

We have the skill set to solve the many complex problems in the administration of solvent deceased estates. We also have the compassion and experience to understand, relate to and empathize with the unique issues facing each stakeholder. We use our decades and generations of experience in acting as an Officer of the Court to bring parties together in a meaningful way.

If you have any questions about our independent Estate Trustee or Licensed Insolvency Trustee services, call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

what happens to your mortgage when you die
what happens to your mortgage when you die
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Brandon Blog Post

THE SAVVY FIRST MORTGAGEE: SOMETIMES YOU CAN’T ALWAYS GET WHAT YOU WANT

First mortgagee: What is the definition of a mortgagee?

A mortgagee is a person or company who gives a loan and uses the property as security for the debt. The mortgagee is the lender. The property owner who borrows the money is called the mortgagor.

I have acted in many real estate receivership matters. Real estate receiverships in Ontario normally involve a court-appointed receiver. The reason is usually that there are many competing parties and perhaps competing claims. The best way to resolve these disputes and for the party that purchases the real estate from the receiver is through court supervision.

In this Brandon’s Blog, I describe a recent decision of the Court of Appeal for Ontario involving a real estate receivership and the claim of the first mortgagee. I and my Firm are not involved in this matter.

What is the definition of a first mortgagee?

A first mortgage is a loan that is secured by real estate property in priority to any other loans registered against the real property. In the event of default, the first mortgage loan has priority over any other loans that are secured by the property. The first mortgagee is the mortgagee that holds that first mortgage for that mortgage loan.

first mortgagee

Institutional First Mortgagee Definition

The term “institutional first mortgagee” refers to a lending institution that provides financing for a first mortgage loan. Such mortgage lenders are typically a banking institution, credit union, or company that specializes in mortgage lending.

The institutional first mortgagee typically offers the lowest interest rate and best terms for the mortgage loan, especially if they are going to hold an institutional first mortgage. However, this is not the case if the institutional lender is one that deals with harder-to-finance properties or sub-prime mortgage loans.

Is it possible to have more than one mortgage at the same time?

There are instances where multiple mortgages may be an option. However, it is no secret that mortgages can be difficult to obtain. Financial institutions are often hesitant to approve multiple mortgages for fear of the borrower’s ability to repay. It is quite possible that to get more than one mortgage a borrower may have to look at the secondary mortgage market to accomplish that second or third mortgage transaction on the same property.

Every lender is different. One lender may see an opportunity where another would deem it too risky. The terms and pricing being offered will match the lender’s risk assessment. Remember, there can only be one first mortgage. Each subsequent mortgage will be more expensive and may have more onerous terms as each subsequent mortgagee is taking on more risk than the first mortgagee lending against the same real property.

Adding another mortgage may only exacerbate your financial difficulties if you are already struggling to make payments on one. Before making a decision, it is important to carefully weigh all of your options.

first mortgagee
first mortgagee

The case I am about to describe highlights the dangers of having an institutional first mortgage and then having a subsequent mortgagee holding the second mortgage when the owner’s business plan for the commercial real estate does not work out.

First National Financial v. Golden Dragon: You can’t always get what you want

The case before the Court of Appeal for Ontario is an excellent instance of not always obtaining what you want. The Rolling Stones stated it best in their 1969 tune, “You Can’t Always Get What You Want.”

The Court of Appeal decision that I describe below may seem fairly obvious. First National Financial GP Corporation v. Golden Dragon Ho 10 Inc., 2022 ONCA 621, stands for the proposition that in order for a first mortgagee (or any mortgagee) to make a claim for accelerated interest on the entire debt, or any other claim a mortgagee may make when a mortgage goes into default, you first must look at the mortgage terms to see what exactly they are entitled to.

The first issue to be addressed is a priority dispute between the first mortgagee, First National Financial GP Corporation (First National), the second mortgagee, Liahona Mortgage Investment Corporation (Liahona); and the mortgagors, Golden Dragon Ho 10 Inc. (GDH 10) and Golden Dragon Ho 11 Inc. (GDH 11) (collectively referred to as the mortgagor). The primary concern of this appeal is whether the trial judge erred in deciding that First National, as the first mortgagee, is entitled to payment of a future, unearned, interest to the end of the term of its closed mortgages.

Additionally, Golden Dragon appealed the receiver’s fee and costs approved by the lower court. The Court of Appeal for Ontario quickly dismissed their appeal.

First mortgagee: Should You Take Out a Second Mortgage?

When it comes to your finances, taking on more debt is generally not considered a good idea. However, there are some situations where taking out a second mortgage charge on title can make sense.

Opting for a second mortgage entails some risks. If you’re unable to keep up with all the mortgage payments, you could lose your property through the power of sale proceedings.

Golden Dragon used to own two residential apartment buildings that were next to each other in Ottawa. When they bought these properties, they assumed three closed registered mortgages: the first mortgage on one building, a first mortgage for the second building, and a second mortgage for the second building. All three mortgages were held by First National. Its second mortgage ranked pari passu with its first mortgage.

Despite being required to give notice to First National under its mortgages, Golden Dragon subsequently placed a second mortgage on the first building without giving any notice. This new subsequent mortgage was held by Liahona.

Golden Dragon took out a second mortgage to get access to funds to use to renovate the apartments. However, Golden Dragon was unsuccessful in renovating the properties and became insolvent. As of December 2016, the Liahona second mortgage was in default and no further payments were made.

Liahona issued a notice of sale for the property of Golden Dragon and obtained a default judgment, and a judgment to take possession of the property.

As of June 2017, the First National mortgage charges on title were in default. Their mortgages included cross-default provisions, meaning that a default under one was deemed to be a default under all three First National mortgages. On August 17, 2017, First National made a formal demand that Golden Dragon pays the arrears and cure the non-monetary defaults and delivered notices of intention to enforce security pursuant to s. 244 of the Bankruptcy and Insolvency Act. Golden Dragon was unable to cure the borrower defaults and the court appointed the interim receiver after considering the circumstances of default.

first mortgagee
first mortgagee

The interim receiver ensured the properties were stable and increased the rental income. Rather than the first mortgagee or second mortgagee selling the properties by way of a power of sale, the court then expanded the interim receiver’s role to marketing and selling the apartment buildings. The interim receiver requested the court’s approval for the sale of the properties. The court found that the approval conditions were met, the sale was approved, and the properties were sold.

 

What can the first mortgagee claim if the mortgaged properties are sold?

The trial judge’s ruling found that the First National registered mortgages did not give it the right to claim the disputed “yield maintenance penalties,” which included an acceleration of all amounts due until the end of the mortgage terms.

Although the mortgages contained a provision allowing Golden Dragon to redeem the mortgages by paying a “yield maintenance” penalty calculated according to a formula set out in the provision, this privilege only applied if Golden Dragon was not in default under the terms of the mortgages. Since Golden Dragon was in default, it no longer enjoyed the privilege of prepayment of the mortgages. As a result, First National was not entitled to charge a yield maintenance penalty.

Despite this, the trial judge decided that First National was entitled to the amounts it claimed as a condition of payout:

  • under a common law rule that a mortgagee is entitled to all accelerated interest owing to the date of maturity when a closed mortgage is vested off the title before the end of the term; or
  • in accordance with an implied contractual entitlement to interest on the unpaid balance, the trial judge read into the First National mortgages.

Liahona submitted to the trial judge that the first mortgagee was not entitled to accelerated interest under their mortgages unless there was a specific clause in the mortgage authorizing such a claim. The trial judge rejected that argument and concluded that the accelerated interest under the mortgage became due when the registered mortgages were terminated prematurely upon being vested off title pursuant to the court-supervised sale.

What the Court of Appeal for Ontario decided

Liahona and Golden Dragon appealed the trial judge’s decision in interpreting the basics of mortgagee clauses for the following issues:

  • Whether the trial judge was correct in finding that the first mortgagee claim for priority for the accelerated interest under its mortgages under common law.
  • If the trial judge erred by implying a contractual term in the First National mortgages that didn’t exist.

The Court of Appeal for Ontario differed from the lower court’s ruling concerning the mortgagee clause relating to accelerated interest. The appellate court noted that the lower court misapplied the law as well not taking into consideration the full scope of the contracts. It further stated that a loan agreement is interpreted according to standard principles of contract interpretation.

The Court of Appeal for Ontario vacated the trial judge’s ruling. Even though First National objected, the appellate court decided that the first mortgagee was only entitled to the principal and interest, plus costs up to the day of the sale of the properties that the court authorized.

First mortgagee: The main point

The main point of this court case is that if you negotiate and bargain for a certain set of contractual terms set out in writing, the court will look at the rights and responsibilities of the parties to the contract. This includes any mortgagee clause it bargained for.

I hope you enjoyed this Brandon’s Blog on what this first mortgagee rights and what it was entitled to from the court-supervised sale of the properties. Are you or your company in need of financial restructuring? Are you or your company insolvent due to a contract you may have entered into? Can you or your business not able to afford to make all your necessary debt payments, including mortgage payments?

The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. We know that we can help you the way we take the load off of your shoulders and devise a debt settlement plan.

We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We can tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. If any of this sounds familiar to you and you’re serious about finding a solution, let us know.

Call us now for a no-cost initial consultation.

first mortgagee
first mortgagee

 

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Brandon Blog Post

THE MORTGAGE DEFERRAL PROGRAM IS FINISHED: ARE YOU NOW SUFFERING BADLY?

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

If you would prefer to listen to the audio version of this Brandon’s Blog, please scroll to the bottom and click play on the podcast.

mortgage deferral program
mortgage deferral program

Mortgage deferral program introduction

Better Dwelling, Canada’s largest independent housing news outlet, recently reported that Canadian banks still have over 254,000 mortgage deferral program.

Most mortgage deferral program ended on September 30, 2020. The purpose of this Brandon’s Blog is to discuss what the mortgage deferral program was and since it is over, now what?

What was the mortgage deferral program?

The mortgage deferral program was an agreement between borrowers and their mortgagees, being Canadian banks. It permits mortgagors to delay their home loan payments for a specified amount of time.

After the deferral period ends, they return to making normal home loan payments. Once payments resume, they need to also pay off the home mortgage payments that were put on hold. Your financial institution figures out just how people repay the deferred payments.

Who could apply for the mortgage deferral program?

Financial institutions evaluate the qualification criteria for home loan deferrals on an individual basis. People might have been eligible for the mortgage deferral program if:

  • you, or any person in your household, are out of work as a result of COVID-19; or
  • you, or any person in your family, experienced a considerable reduction in revenue as a result of COVID-19.

What to expect from the mortgage deferral program

A mortgage deferral program does not cancel, get rid of or eliminate any amount owed on your home mortgage. Interest charges also do not stop when on a payment deferral program. At the end of the arrangement, you will have to return to normal payments according to your original amortization schedule.

The interest that hasn’t been paid throughout the deferral period continues to be added to the principal owing on your home loan. This obviously affects the full amount you owe and therefore the amount of total interest you will pay over the life of your mortgage.

Loan repayments are comprised of both interest and principal. The interest accrues daily. When a payment is made, the amount from the total payment needed to pay down interest is allocated that way. The leftover from that monthly payment is applied to pay down the principal balance.

Over time as the primary balance goes down, the amount of interest from each payment becomes less. The way the arithmetic works, means, as less interest is being paid, more of the monthly blended payment is allocated to repaying principal. The more time that passes where the principal balance does not decrease due to the mortgage deferral program the more interest winds up being paid.

What about paying certain fees during the mortgage deferral program period?

Particular charges for either the administration of or for additional products connected with mortgages could not be waived during the mortgage deferral program. Sometimes, people opt for the bank’s additional mortgage life, disability or critical illness insurance policies to cover their mortgage payments in the event of illness or death. The insurance premium is added to the monthly blended mortgage payment.

Likewise, many people pay one-twelfth of their annual property taxes each month added to their normal monthly mortgage payment. The property tax portion is subject to annual adjustment to account for the difference between the estimated annual property taxes and the actual property tax, once known.

These kinds of payments had to continue notwithstanding any mortgage deferral program period.

mortgage deferral program
mortgage deferral program

What can I expect once my mortgage deferral is over?

When the mortgage deferral program is over and routine payments return, you’ll have the option to maintain payments as they were or increase them. If you can, you could also make a round figure payment amount. The aim is to catch up as quickly as possible on the interest that accrued during the mortgage deferral program period.

You can catch up to your pre-deferral amortization without incurring any type of extra charges. As soon as you’re caught up, any additional payments you might make would be based on your mortgage’s terms and conditions concerning making lump sum or pre-payment to your principal balance without incurring a penalty.

The mortgage deferral program has ended: What if I still can’t pay?

Just because the mortgage deferral program has ended, it does not necessarily mean that everyone can afford to go back to making normal mortgage payments. The coronavirus pandemic with its business closures and always looming lockdowns has not become easier for many.

People whose financial situation has not become better since the pandemic hit, are frightened. I have checked out some “what to do” short articles about if you are having difficulty making your regular home mortgage payments. Most point readers to looking at how a consumer proposal or bankruptcy might help.

Just so you understand, a consumer proposal or bankruptcy are not designed to help you make mortgage payments. In fact, they may lead to you having to sell your home.

Your mortgagee is a secured creditor, presuming its mortgage security is valid and properly registered. A consumer proposal or bankruptcy is a technique of handling your unsecured creditors. The mortgagee has rights if you default on your home loan whether or not you are involved in an official insolvency process.

If you have way too much financial debt and inadequate income to service all that debt, you may very well need to think about an insolvency filing. Yet it is not a straight answer to your mortgage deferral program finishing.

So in order, below are my 3 top suggestions of what you could do when your home mortgage deferral program finishes and also you believe you will remain in financial trouble.

3 steps you can take if you still have trouble making your mortgage payments

Take a critical look at your family household budget plan

I cannot stress sufficiently just exactly how essential the household budget is to your financial safety and security. A spending plan is a listing of all family earnings and all household expenses. Do it on a month-to-month basis. It allows you to prepare just how you need to spend your cash and if there is anything left over monthly for savings for a reserve or for financial investment.

Rather than money just flying out of your pocketbook, you make intentional choices on where you want your money to go. You’ll never ever question at the end of the month where your money went or search for spare change in your purse or wallet.

So if you already have a home budget that you follow, take a look at it carefully. If you don’t’ have one, prepare it right away. Consider the last 6 months and see what your typical monthly earnings have been and what your typical monthly expenditures were. Note them full blast line by line for both earnings and also costs. Then adjust any line that you think might change in the coming months.

After that have a look at it and see if you are spending less or more than you make. If you are spending more, then you need to reduce particular expenditures, raise your revenue, or a mix of both. Reduce any costs that you can. Get to the point where, as a minimum, you are not spending more than you earn. Ideally, you want to spend less than you earn, on an after-tax basis, so that you can build up an emergency fund in case of, an emergency.

Talk to your banker

Be proactive and get in touch with your banker when you suspect a problem. Let them know that you have an existing family budget plan and it reveals that you may require some help. Tell your banker that with the end of the mortgage deferral program period, you still need help.

Your banker will be impressed that you:

  • have a spending plan that you are tracking; as well as
  • you are being proactive and also not triggering the lender to chase you since you turned up on the computer screen as a late payment.

That already makes you the most liked person in the 10% to 20% of individuals who are experiencing trouble paying their home mortgage. Ideally, your lender will be able to do something for you to help.

Call me

If your spending plan shows that you do not have enough family revenue to pay all the family members’ financial obligations on a regular monthly basis, call me. I will take a look at your family budget plan and perhaps get more financial details from you. After evaluating all of it, I will give you my ideal recommendations to meet your unique economic difficulties.

Remember that this is not your fault. The COVID-19 pandemic and the resulting shutdown of the Canadian economic climate continue to cause trouble for the majority of Canadians.

Mention this blog, and I will not charge you a cent for this assistance. I really want you to prosper.

Mortgage deferral program summary

I hope you have found the mortgage deferral program Brandon’s Blog interesting and helpful. The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID-19, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

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Brandon Blog Post

MORTGAGE DEFERRAL CANADA IS ENDING: 3 KILLER WAYS TO DEAL WITH COVID-19 RELATED MONEY PROBLEMS

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

Mortgage deferral Canada introduction

The bulk of the home mortgage deferral Canada that banks have given to Canadians was approved in March and April. This was the time when the COVID-19 pandemic began taking a financial toll on the country with non-essential businesses shuttered and millions unemployed or seeing their earnings take a deep cut.

The Office of the Superintendent of Financial Institutions (OSFI) proposed actions planned to support federally regulated lenders to make sure that they would not experience problems due to the mortgage deferrals provided to help Canadians. The OSFI mortgage deferral help it provided to the lending institutions enhanced the security of the Canadian economic situation and monetary system when faced with obstacles postured by the coronavirus.

The mortgage deferrals are slowly coming to an end. This Brandon’s Blog discusses what you can do if you fear what your personal fallout will be when the mortgage deferrals end.

How did mortgage deferral Canada work for the borrower?

As of July 30, there were approximately $170 billion in mortgage deferments for the biggest 6 banks. The majority were established to unwind by September 30. Mortgage deferral Canada arrangements between Canadians and their financial institutions were truly an individual conversation. The federal government provided a wide overview, yet the specific arrangements between each borrower and lender were established individually as each case required. The significant style was that if a customer was struggling with financial difficulty because of the COVID-19 lockdown, mortgage payments would be deferred for an agreed-on, short-term amount of time.

Currently, these mortgage deferral Canada setups are slowly ending. The chartered banks are reporting that currently, for those whose deferments have ended, 80% to 90% are current in their payments. That means 10% to 20% of people who had a mortgage deferral Canada deal currently cannot maintain their mortgage payments.

How did mortgage deferral Canada work for the lenders?

OSFI told the federally regulated lending institutions and mortgage insurers they can deal with home mortgage financings for which a payment deferment is approved as being current. Payment deferments of as much as 6 months approved prior to August 31 and repayment deferments of up to 3 months approved after August 30 and on or before September 30 that it need not categorize such mortgages as impaired or revamped.

In April OSFI advised lenders that in circumstances where banks provide home mortgage repayment deferrals, those mortgages can continue to be dealt with as performing loans under the . Consequently, OSFI told the banks they did not need to increase their capital resource requirements based upon the home mortgage deferral Canada arrangements they provided. OSFI additionally told the loan providers that it would not assess such mortgage portfolios as having a larger credit risk.

For all federally regulated banks, OSFI specified that it is prepared to use flexibility for any that might need additional time to satisfy upcoming due dates for filing regulatory returns, on a case-by-case basis.

Where mortgages need to be insured due to being high ratio, there are insurance coverage costs that the lending institutions need to make to the insurer each month. OSFI likewise aided the banks and insurers, such as CMHC, by stating that it will not place the lenders or insurers offside when the monthly insurance premiums were not being paid as a result of the mortgage deferral Canada arrangements. OSFI also stated that deferments will not boost capital charges on unpaid premiums. OSFI told insurance providers that they can deal with a mortgage for which a deferment is granted as performing.

So with these OSFI initiatives, lenders can make mortgage deferral Canada happen and both lenders and mortgage insurance providers can treat the mortgages under these deferred home mortgage settlements and mortgage insurance payments, as not being in default.

Mortgage deferral Canada is ending – what can you do if you believe it will cause financial problems for you

OSFI has just stated that any type of mortgage deferral Canada plans past September 30, 2020, will now be subject to OSFI’s typical policies. People who need to start making their mortgage payments once again, but whose economic situation has not improved since the pandemic hit, are scared. I have read some “what to do” articles if you think you will have trouble making your normal mortgage payments. In my view, several have actually missed the mark. Some I have checked out start explaining how a consumer proposal or bankruptcy can help you.

Just so you know, a consumer proposal or bankruptcy cannot help you with the end of your mortgage deferral Canada. The reason it cannot help you is that your mortgage is a secured debt. Your mortgagee is a secured creditor, assuming its mortgage security is valid. A consumer proposal or bankruptcy is a method of dealing with your unsecured creditors. The mortgagee has rights if you default on your mortgage whether or not you are involved in a formal insolvency process. If you have too much debt and too little income to service all that debt, you may very well need to consider an insolvency filing. But it is not a direct answer to your mortgage deferral Canada ending.

mortgage deferral canada
mortgage deferral canada

So in order, here are my 3 top recommendations of what you could do when your mortgage deferral Canada deal with your lender ends and you believe you will be in financial trouble.

  1. Take a critical look at your family household budget

I cannot emphasize enough just how essential the household budget is to your financial security. A spending plan is a listing of all income and your families’ costs. Do it on a monthly basis. It enables you to prepare how you need to spend your money and if there is anything left over each month for savings for an emergency fund or for investment. Rather than cash just flying out of your pocketbook, you make intentional choices on where you want your cash to go. You’ll never need to doubt at the end of the month where your money went or search for a hole in your wallet.

Numerous Canadians panic every month regarding where the cash will come from to pay their bills. A household budget will give you the direction you need. That direction should give you comfort. It reveals to you just how much you make and also what your costs are. If need be you can decrease unneeded costs or possibly tackle extra work to live within a well-balanced budget plan. No extra panicking at the end of the month.

So if you have a household budget that you follow, look at it carefully. If you don’t’ have one, prepare it immediately. Look at the last 6 months and see what your average monthly income has been and what your average monthly expenses were. List them all out line by line for both income and expenses. Then adjust any line that you believe will change in the coming months. Adding your normal monthly mortgage payment is one of those things that will need to be added.

Then take a look at it and see if you are spending less or more than you earn. If you are spending more, then you need to cut back on certain expenses, increase your income, or a combination of both. Take a critical look and slash any expenses that you can. Then see what that looks like.

If you feel that making your normal monthly mortgage payment will not be a problem, then terrific. Just follow your family budget and each month compare your actual to budget. Make any adjustments you need to along the way. However, keep spending less than you earn.

If your budget shows that you are going to have trouble making your normal monthly mortgage payment, then go on to my next step 2.

  1. Speak to your banker

Get ahead of it. Contact your lender. Let them know that you have a current family budget and it shows that you may need added help when your mortgage deferral Canada deal ends. Your banker will be impressed that you:

  • have a current budget that you are tracking; and
  • you are being proactive and not causing the banker to chase you because you came up on the computer screen as a delinquent mortgagor.

That already makes you the most liked person in the 10% to 20% of people who are experiencing problems paying their mortgage. Hopefully, your lender can work something out for you that will help you.

  1. Call me

If your budget shows that you do not have enough family income to pay all the families’ debts on a monthly basis and your lender cannot do anything to help you, then call me. I will take a critical look at your family budget and get more personal financial details from you. After reviewing all of it, I will give you my best recommendations to meet your unique financial challenges. Keep in mind that this is not your fault. The COVID-19 pandemic and the resulting shutdown of the Canadian economy continues to cause problems for the majority of Canadians.

Mention this blog, and I will not charge you a penny for this help. I truly want you to succeed.

Mortgage deferral Canada summary

I hope you have found this mortgage deferral Canada Brandon’s Blog interesting and helpful. The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID-19, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

mortgage deferral canada
mortgage deferral canada
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