The Covid-19 pandemic has left many homeowners with questions regarding their mortgage arrangements. Homeowners may have concerns resulting from increased difficulty making monthly mortgage payments while trying to also pay all associated housing costs and any other ongoing monthly debt payments.
A primary concern for many homeowners during Covid-19 has been whether a lender can evict them if they do fall into mortgage arrears. Is there a threat of being evicted during the pandemic? The answer is that a lender does have the right to take legal steps that may lead to eviction if there is a missed or incomplete mortgage payment. The pandemic has not stopped some lenders from taking these steps.
At Mortgage Broker Store we are very experienced and knowledgeable in the two Ontario legal methods that are open to lenders if a mortgage falls into arrears. To deal with potential mortgage default, Ontario lenders will most likely start a power of sale on your property in order to recoup missed mortgage payment.
Occasionally a foreclosure will be initiated however due to the increased time and involvement of the courts in this default method, it is often less favorable for lenders to initiate a foreclosure on a property.
Regardless of the default method of a lender, both bank lenders and private mortgage lenders are not able to evict a homeowner directly. It must be court ordered and can only be carried out by the Sheriff.
At Mortgage Broker Store we will be able to offer solutions to try to stop any power of sale or foreclosure on your property, thus avoiding an eviction and enabling you to keep your home.
Are Private Lenders Able to Defer Mortgage Payments During the Pandemic?
Many Ontario homeowners who have mortgages from banks have benefited from Federal Government measures to help ease the economic strain of homeowner costs under a prolonged pandemic. These Government introduced mortgage deferral options were designed to keep homeowners firmly in their homes during the height of the pandemic.
The measures did not encompass all types of mortgage arrangements including private mortgages. The measures were also designed to serve as short-term economic help. Mortgage deferrals were permitted between late Spring 2020 until mid-Fall 2020 for a 6 month period only.
All deferred mortgages were mandated to be paid back (both missed principal and interest payments.) The Government was able to provide a temporary band-aid fix for a potentially larger risk of mortgage default on a large scale for many homeowners.
Did a pandemic driven fear of mortgage default materialize as many mortgage industry professionals had forecasted? Fortunately, the answer is no. Although real estate professionals had predicted a double-digit drop in Ontario home prices, and lenders were fully anticipating the real possibility of numerous mortgages falling into arrears, the opposite happened.
Property prices across the Province and highlighted in Toronto and the surrounding GTA appreciated greatly into the double digits. Toronto property year-over-year appreciation numbers averaged a 31% increase according to the Ontario Real Estate Association (OREA). Coupled with these surprising property gains the actual number of mortgage defaults remained very low throughout 2020 and into the first half of 2021.
According to the Canadian Bankers Association July 05th updated mortgage statistics, the number of mortgages that fell into arrears numbered 1,839 out of the total number of Ontario registered mortgages of 2,103,051. These numbers translate into only 0.09% of mortgages that fell into default despite the ongoing pandemic.
Mortgage Deferrals and Private Mortgages
At Mortgage Broker Store we have certainly received our share of inquiries from homeowners concerning whether mortgage deferral programs are still an option and whether there are any deferral programs in place for those that may have private mortgage arrangements.
Useful information regarding Mortgage Payment Deferral may explain Government initiatives taken during the latter half of 2020. These measures, however, often did not cover those who negotiated secured private mortgage financing through any number of private lenders throughout the Province.
Bank mortgages were covered under the 2020 Mortgage Deferral Program. Private mortgages negotiated by private lenders fall outside the parameters of traditional lenders and as such, it became an individual decision as to whether a prospective private lender would agree to defer mortgage payments. Each mortgage arrangement was and the corresponding decision as to permit any type of deferral was, in other words, left to the private lender’s discretion.
Balancing Risk with Payments Arrangement to Ease Short-Term Financial Strain
Mortgage Broker Store is in the unique position of being both a licensed mortgage brokerage and a private mortgage lender. At the onset of the pandemic, throughout and as we climb out of the pandemic, we have made it our priority to be as flexible as we can to help you reach your mortgage payment requirement.
At Mortgage Broker Store, we have also on occasion throughout the pandemic taken over mortgages from a private lender in order to help recoup any financial losses. Occasionally, we have changed a mortgage from one lender to another. Each of these allowances can help to alleviate financial difficulties for both a private lender and a homeowner/borrower. It is our objective to help ease the financial waters of the turbulent pandemic the best we can.
Private mortgage loans are considered by all lenders to be inherently higher risk than long-term amortized mortgages. This stems from the need to overlook poor credit and income issues and lend out mortgage financing based on the overall assessment and appraised value of a homeowner’s property.
Despite the higher-risk nature of private secured mortgage loans, We continue to offer payment deferrals (these deferrals are not part of the Government Mortgage Deferral Plan that ended in late Fall, 2020.) We are striving to come up with creative arrangements that work for a homeowner/borrower in these challenging times.
Just as the criteria for a private loan differs from the criteria imposed for bank mortgage financing, so too are the ways we can help homeowners/borrowers reach their financial obligations.
If your private mortgage was negotiated through one of the many private lenders in our affiliated network of private lenders, then we have actively encouraged these lenders to make contingencies too to help meet the short-term financial constraints. Ultimately, the decision as to what this arrangement will look like and what deferral options may be open rests with the individual private lender.
Mitigating risk and recouping funds lent out towards second mortgage options are always ongoing concerns for any private lender. As a result, a decision is made as to what type of risk an individual private lender is willing to take, both to help a homeowner and still remain on a solid financial footing as a lender.
Pandemic Effect- Private Mortgage Approval Changes
The question may arise as to how has the pandemic affected the overall private mortgage approval process? The answer to this question stems from two slight changes that have occurred as a direct result of an ongoing pandemic:
- Changes to the appraisal process- Covid has put a damper on the appraisal process due to social distancing requirements and repeated lockdowns. Appraisers have had to rely on driving by property or relying on cell-phone video of a home in order to approximate the appraised current value. The cost of appraisals has also risen during the pandemic.
- Changes to the calculated Loan-To-Value (LTV) on some private mortgages- The generally accepted LTV of 75% for most private lenders may have lowered slightly due to the new set of risks the pandemic has brought. The location of the property will also determine the LTV. Private lenders lending towards properties in larger urban centers may still allow a 75% of the value of the property, however, private lenders lending towards properties situated in smaller towns, or in the country may only calculate up to 55% to 65% of the current appraised value of the property.
Mortgage Broker Store Can Continue To Help Navigate Homeowners Through the Current Pandemic
Covid-19 has taken has been a learning experience for us all. With a network of private lenders throughout the Province and the ability to directly negotiate a private mortgage, we are able to help steer you in the right mortgage direction during these difficult times. Poor credit will not stand in your way of obtaining short-term private mortgage financing. Mortgage Brokers Store will help to address any of your concerns and questions as we steer our way out of the pandemic in the months ahead.