Power of SaleFinancial Dictionary -> Mortgages -> Power of Sale
People all around the world are suffering through difficult times due to the economic state of most nations. Foreclosure rates are at an all time high and banks are finding it quite difficult to collect on home loans. Most people are attempting to sell their homes without success while others are just abandoning their homes when they have reached the end of their rope. In Canada, however, there is a clause in most loan contracts that specifically refers to situations of non payment and the rights of the bank in these difficult circumstances. The clause is known as a Power of Sale and is quite vital in reconciling any debts owed to loan institutions.
In Canada, a borrower may fall behind with the payments on a mortgage for a leased home within a specific province. The financial institution takes notice of this and does everything possible to work out something with their client. If nothing is finically feasible for the borrower, the bank will then invoke their "power of sale" clause if it has been structured accordingly in the contract. This clause has been, with the state of the world's financial woes, a standard in most contracts since the beginning of 2009.
The "Power of Sale" clause gives the power to the financial institution to collect money owed on any property that a loan was created for. The home or property in question can be sold outright or may be sold by auction without any consent being made by a court of law. The finances that are generated by the sale of the property are paid to the creditor immediately and the title is awarded to the new purchasing party. Any money that is paid for the property that is left over after the creditor has received their payment will go back to the original owner of the property. Once this transaction is complete, the original owner is cleared of any future payments and will no longer have any rights in claiming it as theirs in the future.
This clause differs quite extensively from a normal judicial sale. The courts get fully involved in the sale of a home under these circumstances, from the posting of the home on the market to the final payment to the banks. The court also brings about the case as a lawsuit which will end up costing more money in the end due to legal fees. Taking the court completely out of the equation, the "power of sale" puts the bank in charge of obtaining what is rightfully owed to them and finding buyers for the properties in question that are willing to keep a stable payment plan in place for the months and years to come.