Private Mortgage Loans

Sometimes a borrower is not able to get approval for a mortgage loan through a bank, credit union, finance or other regular lender. When these conventional options are not available, some will resort to private lenders.

I Regularly Act for Private Lenders

If you are a private lender, remember that many lawyers will not know the regulatory requirements that apply to private lenders or have court experience dealing with defaults. I can provide my private lender clients information about regulatory requirements and help if there is a default.

If you are making an RRSP loan secured by mortgage through various trust companies such as Olympia Trust Company or Canadian Western Trust Company, I am familiar with them and can help you.

Loan Documents & Renewals of Private Mortgage Loans

I can help a private lender with all of the required loan documents and registrations. I highly recommend that the borrower be required to see their own lawyer or notary to get their documents signed. It can be a conflict of interest to act for both in certain cases, but more importantly, if I have acted for both on the lending side, I cannot choose sides if the loan is later in default. I normally can't act for either against the other.

I often see private mortgage loans where the renewals have not been documented properly. I can help my private lender clients with renewals.

Foreclosures on Behalf of Private Lenders

Private loans carry a higher rate of return but also a higher risk of default. They can often result in a loss. If you need to enforce your mortgage, I can help you with that process. I have about 35 years of experience doing this. I regularly conduct mortgage foreclosure or judicial sale actions on private mortgages. My approach is to give practical advice on how to handle the problem and personalize the information given to the court in the various stages of the action rather than using generic boiler plate documents. Your chances of moving the action along in court can often be better when the judge understands your situation better.

Contested Private Mortgage Loan Actions

Sometimes a borrower will contest your court action enforcing your mortgage. They may feel they have a real defence, but often they are simply wanting to stretch the action out as long as possible when they are not able to pay. I have a great deal of experience in dealing with contested actions.

Clients Borrowing or Facing Foreclosure

Just as I act for private lenders, I act for borrowers getting private mortgage loans or facing problems with private mortgage loans. I can represent you through the process and help you make the best of your situation rather than have you spend large amounts for legal fees on arguments bound to fail that will often only lead to frustration and disappointment.

If a Mortgage is Already in Default

If you are a private lender and the borrower is already in default on your loan, remember that the court process is quite lengthy in Saskatchewan. The procedure is quite different from many provinces such as Ontario. Give reasonable time for the borrower to bring payments current, but be realistic and proactive when your instincts tell you they probably will not be paying you. Inaction can increase losses. Remember that if loan payments are in arrears, the borrower is often not paying property taxes and they will have priority over the mortgage. This can also be the case if there is a first mortgage on title ahead of you. Real estate values, especially in smaller towns, may not be as good as you thought when the loan was made. The property fire insurance policy may have lapsed, exposing you to the potential of serious loss if it suffers damage. If the borrowers have moved out, they may have stopped paying utilities. An unheated house or other building can easily freeze in the winter, resulting in great loss that regular insurance policies, even if in place, probably will not cover. Check with your borrower to ensure that the property is occupied and utilities are all connected. Get a copy of the insurance renewal to ensure that coverage is still in place.

Records and Contact Information

Private lending requires an organized person with follow up skills. Unfortunately, there is no course or manual for this that I have heard of. When people get involved in private lending, many of them have to learn by trial and error. Sometimes, their files are missing basic documentation and information on their transaction. They usually have an address, telephone number and email address for the borrower from the time of the loan. However, all of that can change and it needs frequent updating while there is no issue with the loan. A finance company will typically gather alternate contact information they may need if the loan goes in default and court documents need to be served. That includes employer contact information, next of kin and other alternate contact names with their information. Any private lender reading this should try to do the same. Unlike a typical bank mortgage customer, a great deal of private borrowers are resorting to this type of loan because they have had credit problems in the past. Some have learned from experience to be invisible or less visible. Lending to them requires greater care. When a loan is in default, many private lenders mistakenly assume we can find out how to serve the people personally with documents. The truth is that if the lender doesn't have complete contact information already (including alternate contacts), we can't always get it because this information is confidential and authorities such as utility companies are not allowed to release it. Skip trace companies can face the same issues, so while they can be expensive, they may not be able to help either. If we are not able to locate and serve documents, an action can be seriously delayed or stalled. Getting an order for substituted service is sometimes a problem also. Saskatchewan courts will reject that type of application unless there is proof a thorough and exhaustive attempt to locate has been made and we are able to show the court that a particular alternate method of notice is likely to come to the attention of the borrower. Getting that type of order is also expensive and time consuming. A private lender should do their best to gather and update this type of information as it's possible it will be needed if the borrower stops making payments.

Experience

The public often assumes that every lawyer is well versed in all areas of the law. Of course that is not possible. I don't practice criminal law, family law, personal injury law or many other areas or the law because it is not possible to be highly competent at everything. However, I do regularly deal with private mortgage loans and mortgage foreclosure issues. I can help if you have a problem in that area.