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The Process
Vermont allows foreclosure either by filing a lawsuit to
obtain strict foreclosure, in which the
title given tot he 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 borrows to appear and
answer the complaint must be served on the borrower. The complaint must state
the borrower's am 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 re deem 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. |
