In general terms, default denotes the failure of an individual or a group to perform some activity or fulfill any responsibility or obligation that is necessitated by an agreement as per the legal provisions.

The term 'Application Default' is often mentioned in connection with mortgages, especially when the borrower fails in discharging his or her liabilities in a mortgage. Although a mortgagor or borrower would be declared as a defaulter when he or she falls short of fulfilling any of the covenants, but usually the majority of the default cases involve non-payment of loan dues by the mortgagor. It is important to note here that whenever there is a case of default, the mortgagee usually does not rush to seek legal proceedings against the borrower to recover his or her money. On the contrary, despite such provisions in the provincial laws as well as the mortgage agreement, the mortgagee usually examines the various sensible aspects involved with the default and endeavors to resolve the issue by getting in touch with the mortgagor personally. Only when such attempts to resolve the issue through individual negotiations are not working, the mortgagee moves on to seek legal help to recover his or her money.

It is only when a default case really turns indefensible and all realistic measures to resolve the issue have failed that the mortgagee usually looks for advice from experts since he or she is free to avail an assortment of options to recover their money. In such an instance, some default issues are settled in the court of law, while many others may be resolved in accordance with the provisions mentioned in the mortgage agreement. It must be remembered that all default processes depend on the laws prevalent in specific jurisdictions.

Default solutions

As mentioned earlier, default is the failure to accomplish or carry out something that is obligatory under the stipulations of an agreement or under a law. When we talk about mortgages, default does not only mean failure to make payments to the lender, but also includes other responsibilities like paying taxes, the need to recompense the general expenditures in a tenant owned apartment housing and also to maintain the property and undertake its repair whenever necessary.

In the instance of a default by the mortgagor, the lender or mortgagee is free to initiate legal proceedings against the borrower as per the provisions of the law and also the terms and conditions mentioned in the original mortgage agreement for the recovery of the money lent out as well as the damages incurred. The available remedies ensure that the mortgagee is expressly in charge of the loan and is free to undertake any action with a view to implement the original mortgage agreement. However, if the mortgage has been granted insurance covered by the Canada Mortgage and Housing Corporation (CMHC), it is essential that the mortgagee initiates legal or any other actions in accordance to the rules of the prevailing corporation.

Nevertheless, even when there is a default and the mortgagor does not fulfills his or her obligations mentioned in the original mortgage agreement, the mortgagee or the lender does not immediately seek legal actions against the borrower for various realistic reasons. One of the reasons for this is the fact that the mortgagee is usually not involved in the real estate trade and hence would not like to hire additional employees to simply administer the property against which the loan had been secured. Moreover, legal proceedings are usually expensive and under normal circumstances, everyone would want to avoid it.

Defaults or troubles in making payments are most likely to be an indication of complexities in monetary and it is advisable that these difficulties be handled or resolved in an affirmative manner. For instance, these difficulties may be resolved or overcome by restructuring the arrears burden and streamlining the payment systems. In fact, many leading lending organizations have their own guidelines on how to deal with defaulters or default cases. However, irrespective of these individual policies of the lending agencies, the mortgage documents as well as the laws of the respective jurisdictions clearly mention the officially permitted solutions that a mortgagor may follow. These include the power of sale or the foreclosure of the property against which the loan had been secured. Even though the borrower may try to settle the issue of default by adopting non-legal procedures, either party - the mortgagor or the mortgagee - may undertake legal proceedings to resolve the issue any time they wish for they have all the options to recover their money at their disposal.

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