Paul Clark
In this Blog we open the conversation with
economic loss caused by the current mortgage
crisis.
Vermont Foreclosure Law
Quick Facts
- Judicial Foreclosure Available: Yes
- Non-Judicial Foreclosure Available: Yes
- Primary Security Instruments: Deed of
Trust, Mortgage
- Timeline: Typically 210 days
- Right of Redemption: Yes
- Deficiency Judgments Allowed: Yes
In Vermont, lenders
may foreclose on mortgages or deeds of trust in
default using the strict or the power of sale
foreclosure process.
Strict Foreclosure
The strict foreclosure process is based on the
premise that the lender owns the property until the
mortgage has been paid in full. If the borrower
breaks any of the conditions established in the
mortgage prior to the time the loan is paid in full,
he or she will lose any right to the property and
the lender will either take possession of the
property or arrange for it's sale. In Vermont, a
suit must be filed in the county where the property
is located before either of these actions can occur.
The borrower will be served a summons to appear
before the court and informed of his rights, at
which time the lender may move for a summary
judgment and avoid the trial altogether.
Regardless, the borrower has either a six (6) month
(post-1968 mortgages) or a twelve (12) month
(pre-1968 mortgages) redemption period.
Power of Sale Foreclosure
A "power of sale" clause is the clause in a deed of
trust or mortgage, in which the borrower
pre-authorizes the sale of property to pay off the
balance on a loan in the event of the their default.
In deeds of trust or mortgages where a power of sale
exists, the power given to the lender to sell the
property may be executed by the lender or their
representative, typically referred to as the
trustee.
In Vermont, power of sale foreclosures are conducted
either judicially or non-judicially, depending on
the type of property securing the deed of trust or
mortgage.
Judicial Foreclosure
In Vermont, lenders who wish to obtain a foreclosure
using the power of sale clause in the deed of trust
must first file a complaint in a court having
jurisdiction in the county where the property is
located to try and obtain a decree of sale. This
form of foreclosure must be used when the property
includes a dwelling of two units or less, with the
owner using said property as their principal
residence. The sale of this type of property may not
be held until seven (7) months after the decree of
sale has been issued.
Non-Judicial Foreclosure
In Vermont, when a power of sale is contained in a
mortgage relating to any property except for a
dwelling house of two units or less, that is
occupied by the owner as a principal residence, or
farmland, the lender may exercise the power of sale
without first commencing a foreclosure action or
obtaining a foreclosure decree.
Power of Sale Guidelines
At least thirty (30) days prior to the
publication of a notice of sale, a notice of
intent to foreclose must be sent to the borrower
by registered or certified mail at his or her
last known address. The notice of intent must
include information on the mortgage to be
foreclosed, state the condition breached and the
lenders right to accelerate the mortgage, and
include the total amount necessary to cure the
default. The borrower must also be informed that
he or she is entitled to receive a notice of
sale at least sixty (60) days prior to the date
of sale.
The borrower may redeem the property at any
time prior to the foreclosure sale by paying the
full amount due on the mortgage, plus costs.
The sale must be held on the property
itself, unless otherwise ordered by the court,
and the property must be sold to the highest
bidder. Anyone may bid at the sale, including
the lender. The borrower is entitled to receive
any surplus from the sale, but they may also be
sued for deficiency if the sale price is not
enough to cover the amount of the mortgage in
default.
If the property is sold without court
action, as in non-judicial foreclosure by power
of sale, the notice of sale must include the
following language:
"The mortgagor is hereby notified that at any
time before the foreclosure sale, the mortgagor
has a right to petition the superior court for
the county in which the mortgaged premises are
situated, with service upon the mortgagee, and
upon such bond as the court may require, to
enjoin the scheduled foreclosure sale. Failure
to institute such petition and complete service
upon the foreclosing party, or their agent,
conducting the sale prior to sale shall
thereafter bar any action or right of action of
the mortgagor based on the validity of the
foreclosure, the right of the mortgage holder to
conduct the foreclosure sale, or compliance by
the mortgage holder with the notice requirements
and other conditions of section 4532 of Title
12. An action to recover damages resulting from
the sale of the premises on the date of the sale
may be commenced at any time within one year
following the date of the sale, but not
thereafter."
