Mortgage Broker

secondpriority 38 | spring 2018 cmba-achc.ca CmB magazIne Having the first mortgagee respond to such a request helps the second mortgagee as an additional form of estoppel against any assertion that the second mortgagee failed in providing notice of its subsequent charge. Although giving both initial notice upon registration of the mortgage and further notice when the second mortgage is funded may seem to be going above and beyond the requirements of the PLA, it is important to realize how frequent priority issues are between first and second mortgages, and that proper notice can really be the deciding factor on how the first mortgagees respond. Please note that our B.C. courts have ruled that an initial or preliminary request for information regarding the status of the first mortgage, but with a failure to give notice to the first mortgagee of the actual registration of the second mortgage, is not considered sufficient notice under the PLA. e courts outlined that the first mortgagee has no obligation to search the title every time it receives an inquiry or every time it advances funds. e onus is on the subsequent charge holder to provide actual notice of registration. Simply put, but nevertheless important, an enquiry of the balance and good-standing status of the prior mortgage is not enough to gain protection under section 28 of the PLA. In Ontario, actual notice is required under section 73 of the Registry Act and section 93(4) of the Land Titles Act, which provide that monies advanced under the first or prior mortgage will rank in priority to a subsequent mortgage except for advances for which the first or prior mortgagee has received actual notice. Similar to B.C., Ontario legislation recognizes that registration itself is not enough to constitute actual notice. To gain protection under sections 73 and 93(4) against subsequent advances, the onus in Ontario is on the subsequent charge holder to provide actual notice of registration to the first or prior lender. Conversely, section 104 of the Alberta Land Titles Act provides that a mortgage will rank in priority to a subsequent mortgage notwithstanding that the subsequent mortgage was registered. Although actual notice to a first or subsequent mortgagee may be grounds for an estoppel argument to gain priority over subsequent advances, Alberta courts have not yet ruled on this matter. hELPFuL PoInTS In light of the priority issues and the increased risks of private and/or subsequent mortgages, it is important to develop prudent practices as a mortgage broker. Here are some prudent steps you can take when you are confirming the details of the second mortgage. 1 Confirming the first Mortgage information As virtually all the banks and credit unions now use "all indebtedness mortgage"-type language to describe the principal amount owed under their first mortgages, you really need to pay attention when confirming the terms and detail of the first mortgage. Be sure to request each and all loan facilities secured by the registered mortgage. 2 Notice with the Request As mentioned earlier, some second mortgage lenders, or their lawyers, will give notice of the second mortgage registration as part of their request for information (balance owed, arrears, etc.) in respect of the first mortgage; this practice is a helpful method for having estoppel if the first mortgagee asserts that the second mortgagee failed to provide notice of its subsequent charge. Due to the fact that priority disputes between first and second mortgagees are common, developing the prudent practice of sending out notice pursuant to section 28 in B.C. or sections 73 and 93(4) in Ontario with your requests of information can help mitigate potential issues in the future. ConCLuSIon ere are many different factors and characteristics that differentiate a private or second mortgage lending scenario from the "conventional" institutional first mortgage. is area of practice requires many different skill sets and a strong level of flexibility to tackle the diverse issues and challenges that may arise. Of course, this area also provides you with the opportunity to meet a true cross-section of people to work with. e time frame between receiving your first instructions to finalizing the transaction can be extremely short and requires any practitioner in this field to be able to act and react quickly for their client, take charge of the situation and provide top-shelf service. note: e above article is meant to summarize certain general issues surrounding second mortgages but the authors advise that the article is not a substitute for legal advice on a specific lending transaction. Each such transaction has its own particulars and you should seek appropriate professional and legal advice on each loan transaction.

• Cover