Options for Home Owners Facing Mortgagee Sale 

When a mortgage lender or a bank issues a PLA Notice due to default, is the situation beyond salvage? 

Is there a chance to save your home or it’s all downhill from there? 

Tough times can hit anyone. Perhaps you’ve lost your job or lost a major client from your business. If you are facing financial hardships it can cause you to default on your mortgage. It is comforting to know you have several options other than to wait for the lender to mortgagee sale the property. 

If you have received a PLA Notice, the first thing you should do is to reach out to the lender. Then engage a legal professional, such as a property lawyer, to accompany you as you meet with the lender and discuss the following options with you. 

Regularize the Mortgage 

A notice issued under section 119 of the Property Law Act (2007) outlines the default position, the arrears and any penalties you have incurred under the mortgage. It also stipulates a date by which you must remedy the situation. This deadline usually comes 20 days after receipt of the notice. 

If you have received such a notice, the first, and most obvious option available is to regularize the loan. 

Call the lender and request them to reinstate the mortgage after making a lump sum or scheduled payments. You may explain to them that you had a few rough months and things are better now. 

You may have bagged a new client or found another job. The bottom line is you are back on your feet and can continue servicing the mortgage. 

Refinancing 

Depending on how much equity you have on the home, you can approach the lender and stop the mortgagee sale through refinancing. 

If you have made significant payments towards the mortgage it means that you own a larger portion of the home equity. You can talk with the lender, and seek an opportunity to refinance the loan. 

The lender may issue a new loan and include the outstanding arrears, fees, and penalties into the new loan figure. This may buy you some time and perhaps even put some cash in your hands which you can use to stabilise your financial situation. 

Sell the House 

Mortgagee sales are distressed sales and lenders loathe them. There’s a chance that the homeowner might resist and the buyers are often apprehensive due to the perceived risks. This, in turn, causes realtors to have a hard time to find a buyer at market price. Also, mortgagee sales don’t make good publicity for the lender. 

If you cannot continue making mortgage payments, consider selling the home without the stigma of a mortgagee sale. Properties sold this way usually attract better prices and leave a happy homeowner. They also save the lenders resources used in hiring legal experts and realtors as well as shielding the bank from adverse publicity. 

You can sell the home, settle the loan and penalties, and have some leftover cash to start all new. 

Restructure the Loan 

Perhaps you defaulted on the mortgage due to an income dip. If that’s the case, reach out to the lender and explain your situation. Banks and other mortgage lenders want to resolve such issues amicably and would rather restructure the loan, to accommodate your situation. 

The bank could restructure the loan and spread the payments over a longer period so that you can make more comfortable monthly payments. 

But you will never know which of these options can work out for you unless you reach out and talk with your lender. So reach out and talk with the lenders.