# Is a Mortgagor obligated to inform the Mortagee if he is sued?



## Panama Pete (Nov 5, 2015)

I have researched this subject and all I came up with was that if applying for a mortgage the mortgagee should be informed. I could not come up with any information regarding an existing mortgage. I have read a few mortgages and have seen some language which might apply but am not sure.

So:
1. Is a Mortgagor obligated to inform the Mortagee if he is sued?
2. What would the language look like? Would it be in a specific section of the mortgage?

A secondary question regards selling a house. The house in question is being sold by putting a hardware store sign 10"X12" in a front window. THAT'S ALL!!! No listing, MLS or otherwise that I can find. A Brokerage RE sign was put on this property in the Spring of 2014 but I could never find the listing on that brokerage's site. That sign was later removed. There seems to be something fishy about the sale of this house.

(The background to all this is that the house is owned by NEIGHBORS FROM HELL, with the whole nine yards of roaming, attacking dogs, and noisy, racing ATVs, stunting vehicles and out-of-control youth and 3AM car crashes.) 

Pete


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## marina628 (Dec 14, 2010)

You can sell a home however you wish , in rural areas homemade signs are quite common to see.


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## birdman (Feb 12, 2013)

While I can't answer you question I can tell you that when I was in the business and held a mortgage over the property (as mortgagee) it seemed we were the last to hear that that the mortgagor was being sued. Really, law suits mean nothing until proven in court and in a civil action judgement is obtained. If the judgement was registered on title the mortgagee may not even know unless they do a title search or the lien holder starts an action on the property. Quite frankly, I doubt if they would do much even if they could as long as the payments were up to date.


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## Rusty O'Toole (Feb 1, 2012)

Should not be a factor unless the lawsuit involves the property in some way, and then only if the mortgagee's rights are involved.

Are you talking about the neighbors selling their house? How does this affect your property?


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## Just a Guy (Mar 27, 2012)

Any lawsuit lien would be secondary to the mortgage, so the bank probably wouldn't care since they are first in line.


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## heyjude (May 16, 2009)

I've had several mortgages, and I have never been asked if I was being sued when making a mortgage application. 

I also have had experience with stratas where an owner has been sued by the strata corporation for not paying strata fees. The strata corporation placed a lien on the property. This meant that when the property was foreclosed and sold, the strata fees were paid before the mortgage. The mortgagee knew about it because of the lien on the title.


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## Mortgage u/w (Feb 6, 2014)

Getting sued has nothing to do with the property and the lender has no concern as long as the mortgage is paid regularly. Unless a judgement is obtained towards the person who owns the property and a lawyer slaps a lien on it, then it becomes an issue.....but even then, it would not affect nor concern the person purchasing the property. When a sale occurs, the lawyer's job to deliver a property with clear title. So any outstanding liens will have to be discharged before there is new ownership. Personal liens become secondary to mortgage liens but government liens are always primary.

You can list a property for sale in any manner you wish. What counts is what happens in the lawyers office while exchanging title.


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## Panama Pete (Nov 5, 2015)

Thanks for the replies. I must say I am surprised by the answers, basically that a creditor doesn't care about issues which may affect the creditworthiness of a debtor. I would say that yes it is important to keep the payments up to date but an important part of the status of any loan would be the ability to keep those payments up to date* in the future*. A lawsuit could have a very damaging affect on that ability. If I were a lender I would want to know of any significant change in the financial status of the borrower. I would think any lender issuing a new loan or refinancing an old one would want to know of ANY legal action against a potential borrower. 

As to the other question:
"A secondary question regards selling a house. The house in question is being sold by putting a hardware store sign 10"X12" in a front window. THAT'S ALL!!! No listing, MLS or otherwise that I can find. A Brokerage RE sign was put on this property in the Spring of 2014 but I could never find the listing on that brokerage's site. That sign was later removed. There seems to be something fishy about the sale of this house."
I realize that anyone can sell a house anyway they wish but a "hardware store sign 10"X12" in a front window." That seems absolutely bizarre to me. 

Pete


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## Just a Guy (Mar 27, 2012)

The creditor does his due diligence when you apply for a loan. While they reserve they right to ask you to requalify, it takes a lot of time and effort to do so, so they usually don't. As long as you make your payments on time, you are considered a "low risk" and would probably just get auto-renewed going forward. Of course, if you want to change lenders at some point in the future, the new lender would look into your ability to pay...


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## MRT (Apr 8, 2013)

Just a Guy said:


> Any lawsuit lien would be secondary to the mortgage, so the bank probably wouldn't care since they are first in line.


it depends upon when the lawsuit occurred during the mortgage process, and it may differ by province). At least in Ontario, if the judgment existed prior to the mortgage being advanced, it will almost certainly become an issue. 

In addition to a property title search, a writ/execution search is conducted against the names of all borrowers when title is transferred or a new mortgage is setup. If a judgement has been issued as a result of the lawsuit, it will likely show up here and be required to be paid out by the borrower. Depending on the details and the lender, if a payment arrangement is in place to settle the judgement, the monthly debt obligation might just be factored into qualifying the mortgage.

if the lawsuit occurs after the mortgage has funded, it will impact nothing. Since no additional credit adjudication is typically done at renewal, it would also not prevent someone from renewing their mortgage with the same lender. If you move the mortgage to a new lender, the above scenario likely comes into play.


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