Mortgages are really two separate legal obligations. A mortgage is a type of lien on the property it is registered against, and represents security for the debt. Separate and apart from the security, a mortgage is promise to pay. If a mortgage goes into default the creditor can get paid from selling the real property and/or by getting a judgment on the promise to pay (usually referred to as the covenant).
Typically the creditor (usually called the mortgagee) can seek to be repaid in two ways. He can start a foreclosure proceeding to take title to the property. This is rarely done (in a real estate recession this is a little more common when the debt may be much greater than the property could be sold for to a third party)
The more common way to proceed is to serve a Power of Sale (formally called a Notice of Sale under Mortgage). If 35 clear days have elapsed and the debtor (formally known as the mortgagor) has not put the mortgage back into good standing, a lawsuit will be started for possession and for the covenant (the amount of the debt). If judgment is obtained, the creditor takes possession of the property (unusually through a Sheriff’s eviction) and sells the property. If there is a deficiency on sale the creditor will look to the debtor to pay. If there is a surplus after paying all principle, interest and costs and expenses, the debtor will get the surplus.
At Landy Marr LLP we have been acting for lenders and borrowers in mortgage litigation since 1977. Typically when acting for creditors, we act for private lenders, and not for institutional lenders like banks. We also fight for homeowners defending themselves against banks or other lenders.