Default Management, Power of Sale, and Collections
Default and Remedies
Understand what constitutes default: missed payments, breach of covenant, failure to insure or pay taxes, and unauthorized secondary financing. Know the lender's remedies, including demand letters, forbearance agreements, and enforcement. In Ontario, the primary residential remedy is power of sale under the Mortgages Act, with judicial sale or foreclosure available in some circumstances. Understand the notice of sale process, the redemption period, and the borrower's right to redeem by paying arrears and costs.
Collections and Conduct
Know that collection activity must comply with consumer protection and licensing rules, including restrictions on contacting borrowers at unreasonable hours or at work, and prohibitions on harassment or misleading statements. Understand the duty to provide clear information about arrears and options, and the role of the licensee in assisting a borrower in difficulty - including refinancing, sale, or a repayment plan.
Traps in Exam Questions
Questions often test the difference between power of sale and foreclosure: power of sale transfers the property without court supervision in the usual case, while foreclosure extinguishes the borrower's equity of redemption through the court. Watch for confusion about who may conduct the sale, the notice period, and whether a lender must accept a late redemption. Also watch for the rule that a licensee should not advise a borrower to ignore a notice.
Rule of Thumb
On default, act early: the earlier a borrower engages, the more options remain; ignoring a notice of sale narrows remedies to redemption or loss of the property.
Worked example: A borrower three payments in arrears receives a notice of sale. The agent should explain the redemption amount and timeline and present refinancing or sale options rather than advising the borrower to wait.