 Vermont Loan Modification Guidelines
When you develop a definite plan of action with well-timed, well-informed
steps, you can stop the foreclosure process and save your home. We have
outlined the foreclosure process for the state of Vermont.
The Process
Vermont allows foreclosure either by filing a lawsuit to obtain strict
foreclosure, in which the title given to the lender by deed will be ruled
to be final, or by filing a lawsuit to foreclosure under a power of sale
clause in a deed of trust. Both procedures are governed by the Vermont
Rules of Civil Procedure. There is a statute for deed of trust foreclosure
(VT. Stat. Ann tit 12 §4531a). Under Vermont's strict foreclosure procedures,
the lender gets a deed to the property at the outset of the loan, but the
deed also provides that the borrower can get the title back by repaying
the loan. All the lender has to do is get a court declaration that the
borrower has failed to meet the condition, and the title becomes final
in the name of the lender after a statutory redemption period passes, during
which the borrower can recover the property by paying off the rest of the
loan.
In strict foreclosure a complaint (lawsuit) must be filed in county court.
The complaint and a summons to the borrowers to appear and answer the complaint
must be served on the borrower. The complaint must state the borrower's
and lender's names, the date of the mortgage deed, a description of the
debt owed and a claim for attorney's fees, if any are sought. It must state
that the reason the lender is foreclosing, is a breach in the deed's conditions.
Although the lawsuit prays for the court to foreclose the borrower's right
to redeem the property, the borrower nevertheless has a right to redeem
under Vermont's statutes. Under Vermont statutes the time for redemption
is one year for pre-1968 mortgage and six months for post-1968 mortgages,
from the date of the judgment. However, the lender can request a shorter
time for good cause. Once the complaint is served, the lender may move
for summary judgment in order to avoid trial.
Non-judicial Foreclosure
Due to Vermont's long tradition of strict foreclosure, a foreclosure sale
under a power of sale clause has only recently become common in residential
loans, although they have been common in commercial transactions. Vermont
does not have a well-established tradition of foreclosure auctions. In
Vermont, a lender must still bring a lawsuit to foreclose a deed of trust
and obtain an order for a sale. However, the foreclosure may not take place
until seven months have passed from the date the lawsuit was served on
the borrower, unless the borrower and lender agree otherwise, or the borrower
is damaging the property.
Deficiency
In Vermont a lender may sue the borrower to collect deficiency if the
foreclosure sale under the deed of trust was not sufficient to repay the
loan plus the foreclosure expenses. However, if the lender buys at the
foreclosure sale, the borrower can force the lender to credit the fair
market value of the property against the total amount owed, which includes
the loan balance and the foreclosure expenses. If the foreclosure sale
generates a surplus, junior lien holders and creditors may claim it up
to the amount owed in the order of their priority.
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