Mortgage Broker

CMB MAGAZINE cmba-achc.ca winter 2017 | 55 As to the second bullet, the mortgage documentation can set out the scope of what is to be included as a mortgage debt. Recent British Columbia decisions show that the scope of a foreclosure proceeding depends upon the wording in the mortgage document; recovery of the debt is not necessarily limited to the dollar amount specified as the mortgage principal. However, a mortgage does not secure loans not contemplated by and in accordance with its terms. If there is no agreement as to the cashback being included in the mortgage debt, then it is not included. Recent Supreme Court of Nova Scotia Case e Supreme Court of Nova Scotia – in its February 29, 2016, decision in Scotia Mortgage Corporation v. Misener, 2016 NSSC 66 – demonstrates the analysis. At the time of lending, a lender provided the borrower with a cashback amount in addition to the principal amount of the loan. e loan documents stated that a portion of the cashback was repayable if the mortgage loan was not outstanding for its full term. e loan fell into default and the lender claimed the cashback amount as part of the mortgage debt owing. e Court reviewed the Nova Scotia legislation and said it did not contain a definition of "mortgage debt." It looked at legislation and the Civil Procedure Rules related to mortgages, mortgage debts and foreclosure. It concluded that the cashback amount in the case can be part of the mortgage debt if it is: n part of the outstanding principal, or n a reasonable charge authorized by the mortgage instrument. e Court further said the cashback amount is not part of the outstanding principal, as the mortgage documentation indicates it is in addition to the principal rather than part of it. Furthermore, the Court said, aer reviewing the documentation in this specific transaction, that the cashback amount is not a reasonable charge authorized by the mortgage instrument; it is an amount repayable if the mortgage loan does not remain outstanding for full term, whereas a reasonable charge is an amount made and charged to the mortgage debt. (A "reasonable" charge is one that is necessary to preserve or otherwise protect the mortgage property. A cashback is none of these things; thus, in this case, it is not a reasonable charge authorized by the mortgage instrument.) Accordingly, the lender was not permitted to include the cashback amount in the mortgage debt claimed as owing in the foreclosure action. The Takeaway A lender who wants to better the chance of being able to claim a cashback amount as part of the mortgage debt in a foreclosure action may want to consider explicitly providing wording in the mortgage documentation covering that: n the cashback amount is part of the principal and the mortgage debt owing under the mortgage, and n the lender is entitled to recover the cashback amount in a foreclosure action as part of the principal and the mortgage debt. e lender may want to go further and state that: n the cashback amount forms part of the principal and mortgage debt owing from the time it is advanced, and n the lender is required to forgive repayment of the cashback amount if the mortgage is repaid aer its term expires. ese clauses may or may not be enough, but they would go some distance toward overcoming the difficulties experienced by the lender in the above case. Cashback

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