Predatory lender could take your house in a power of sale

Click to play video: 'Toronto family almost loses their home in a power of sale'
Toronto family almost loses their home in a power of sale
WATCH ABOVE: Low interest rates and a desire to own a home in Toronto are reasons so many people are caught up in this city’s hot real estate market. But miss just one mortgage payment -- and if you've borrowed from the wrong lender -- you could be in for a power of sale or foreclosure and out on the street – Feb 17, 2016

TORONTO — Laura Laing and Glenn Gourley thought Toronto’s hot housing market presented a perfect opportunity to make some money: they’d buy a couple of properties with borrowed money, fix them up, and flip them for a decent profit. But instead, the effort nearly left them homeless.

“We thought we’d be thrown out with our five children over the Christmas holiday,” said Laing, a stay-at-home mother.

Their lender, who lives in central Ontario, provided second mortgage financing for the deals.

READ MORE: Surging house prices in Vancouver and Toronto raising risk of ‘deeper’ correction: TD

What the couple hadn’t realized when they signed borrowing documents is that the lender also added a second mortgage to their principal residence — in addition to the two properties they were buying.

When the couple had some difficulty making payments, the lender swooped in, added tens of thousands of dollars in late fees and charges for simply driving by the properties.

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“He was like an abusive husband I wasn’t married to,” said Laing, referring to frequent phone calls from the lender and threats of eviction as a result of money owing.

Over the course of a few weeks, demand letters and threats from the lender’s lawyer piled up.

When Global News first became aware of the family’s situation, they had just enlisted the help of Ron Alphonso, a scrappy Toronto mortgage broker who specializes in helping buyers in circumstances like theirs.

The two homes that were purchased as revenue properties were sold off as the couple worked to get off the lender’s financial hook.

But just before Christmas, the lender took action to have their home put on the market in a “power of sale” that would have left the couple and their children with a place to live.

READ MORE: Vancouver housing prices jump over 30%; Toronto also sees spike

Soaring fees added by the lender saw the couple now owing about nearly half a million dollars.

Alphonso started putting questions to the lender and its law firm, asking they justify the fees behind the demand. Alphonso reminded the lender and lawyers that negative publicity would be unfavourable.

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“After about a month or so he realized that maybe he should come to an agreement with us and he managed to lower the amount,” said Alphonso.

“The lender reduced his mortgage from approximately $492,000 down to about $172,000,” he added. “This allows the home owners to get a new mortgage (with a different lender) and keep their house.”

READ MORE: New mortgage rules are about to hit first-time buyers in hot housing markets

From now on, Gourley says he’s not venturing into the renovation and resale business.

“Don’t try to make a quick buck — It’s a very complicated real estate business,” Gourley said.

Mainstream lenders like chartered banks would never apply the kind of pressure exerted by the second mortgage lender in this case, said Alphonso.

But, he says, soaring prices and stretched out consumers are finding themselves in financial peril more frequently.

“My guess is, just based on the work I do, every 40th or 50th house in any neighbourhood is in some situation like this,” he said.

“The more expensive the house is the more likely this situation is.”

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