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VERMONT FORECLOSURE HELP

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Vermont Foreclosure Statute Laws

Judicial and non-judicial foreclosure is available in Vermont.  Primary service instruments are deed of trust and mortgage. The timeline for foreclosure in Vermont varies by process, but typically last 210 days. Right of Redemption and deficiency judgments are allowed.

    • 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 a 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.”

 

ADDITONAL INFORMATION FOR VERMONT:
Is the bank foreclosing on my home?
In Vermont, before the bank can take your home, the bank has to sue you in court. The court case starts when a sheriff gives you legal papers called a Summons and Complaint. Or, if the sheriff can't find you, sometimes the sheriff will give the papers to someone who lives with you or leave the papers on your door. All of this is called "serving" you with the lawsuit. This is how the lawsuit starts. The bank also sends the Summons and Complaint to your county Superior Court.

TIP Banks often say "you are in the foreclosure process" or "we are referring you for foreclosure" or "we are already foreclosing on you." But the bank might not have started a lawsuit yet. Also, before the bank starts the lawsuit, they should send you a letter that says they are "accelerating" your mortgage and the full amount of the loan is due. If you are not sure if a lawsuit has started, call the Superior Court for the county you live in and ask if a foreclosure case has been started against you.

TIP When you are served with papers for a foreclosure lawsuit, it is very important to talk to a lawyer right away. You must give the court a written response within 20 days of when the sheriff served the papers. If you can, get legal help when you write your response to the court.

I have a loan through FHA, HUD, FmHA or VA Requirements
If you do, there are special requirements that may give you extra rights. Those rights are not explained on this website. If you have a mortgage loan insured though the U.S. Department of Housing and Urban Development (HUD) or through USDA Rural Development (formerly called Farmers Home Administration or FmHA) or if you have an RHS/FmHA financed home or a Veterans' Administration(VA) guaranteed loan, talk to the place you got the loan or talk to a lawyer about your rights. For example there may be special requirements that the lender has to follow if you fall behind in your payments, or you may be entitled to reduce the amount you pay or temporarily stop your payments in some cases.

What will happen in court?
A foreclosure case in court usually takes about 8 months. Some cases are as short as two months, and some take more than a year. Here are the basic steps of a foreclosure case in court. Not all these steps happen in every case. Don't use this information as advice about your individual situation.

Summons and Complaint
These are the legal papers that say the bank wants to foreclose on your home. The Summons tells you that you must respond in 20 days. The Complaint says why the bank is suing you.

Answer
You must give the court a written response in 20 days. If you don't, you could lose your house suddenly, without warning. Your written response is called an Answer. You must send a copy to the bank's lawyer. In your Answer, you must say why you disagree with what the bank said in its Complaint. In a foreclosure case, you must get your Answer notarized by a notary public. See udolegal.com for an ANSWER FORM.  You should talk to a lawyer if you can when you fill this out. If you don't have time before the deadline, get your Answer to the court on time and then talk to a lawyer as soon as possible after.

Counterclaims
If you believe the bank owes you money for any reason, you can say this in your Answer. This is called a counterclaim. Counterclaims are complicated and it is important to talk to a lawyer before putting a counterclaim into your Answer. If you put a counterclaim in your Answer you will have to pay a fee to the court. But, if you can't afford the fee, you call fill out a form. The court decides your income is low enough, you won't have to pay the fee.

Motion for Default and/or Summary Judgment
In most foreclosure cases, the bank will send legal papers to the court called Motion for Default and/or Summary Judgment. These papers ask the court to make a decision about foreclosing on your house without having a court hearing. If you agree that you are behind on the mortgage, the court will probably agree with the Motion for Default and/or Summary Judgment. This means there will be no court hearing. Instead, the court will issue a Judgment Order and Decree of Foreclosure.
But if your Answer shows the court a good reason that you are not behind on the mortgage, the court will have a court hearing. Or, if you have a big counterclaim in your Answer, the court might have a court hearing. The court would have a hearing if the amount of your counterclaim is at least as much as the bank says you are behind on the mortgage.

Merits Hearing
If the court decides there is a real question about whether you are behind in the mortgage, the court will have a hearing. Or, the court might have a hearing if you have a big counterclaim that could cancel out the amount you are behind on the mortgage. If the court decides you do not owe money to the bank, you win and the court case is over. If the court decides you do owe money to the bank, the court will write a Judgment Order and Decree of Foreclosure.

Judgment Order and Decree of Foreclosure
This is a court order that says you are behind on the mortgage and the bank can foreclose. But this does not mean you lose your house automatically. The court order will give the dates of a Redemption Period. During the Redemption Period, you have the chance to save your home. Usually the Redemption Period is six months, starting after the date of the court order.

Redemption Period
The Redemption Period can be six months, or it can be shorter. The court decides how long. Check the dates in the court order carefully to find out when the Redemption Period ends. The point of the Redemption Period is to give you a chance to save your home or to sell and get your equity out of the home. If you pay off or if you sell, the court says you "redeemed" the home. During the Redemption Period you can stay in your home and you don't have to make mortgage payments. You should save the money in case you need it to move.

How can I save my home in the Redemption Period?
You can only save your home if you have a steady income. Below you can read about different ways to save a home in the Redemption Period. Sometimes you can save your home if your income is lower than it was when you got the mortgage, but you will still need to have a steady income, like from Social Security or from employment. If you don't have a steady income, you will probably have to sell your home.

Refinance
If you can refinance during the Redemption Period, you will save your home. Refinancing means you get a new loan from a new bank and you pay off the bank that foreclosed on you. You must pay off the full amount the court order says you owe. This includes the loan amount, the bank's expenses from the court case, and daily interest from the date of the court order until the date you pay. You should talk with the bank's lawyer or the court to confirm the exact amount. If you pay the full amount, the bank must accept the money and let you keep your home.

Bankruptcy
Another way some people save their home in the Redemption Period is bankruptcy. You must do a special kind of bankruptcy called a Chapter 13 bankruptcy. To do this kind of bankruptcy, you must have enough monthly income to pay your mortgage payments, plus extra back payments each month, plus all your other living expenses. The good thing about bankruptcy is you get 3-5 years to catch up on the mortgage. The bankruptcy court makes the bank give you that much time to catch up, even if the bank wants you to pay sooner. If you have other debts, like credit card debts, you may be able to get rid of those in the bankruptcy, so it will be easier to catch up on your mortgage. You will need to hire a lawyer to do a Chapter 13 bankruptcy. You might be able to pay the lawyer over 3-5 years, or you might have to pay the lawyer�s fee up front.
The details of the deal can be anything that you and the bank agree to. You might have to pay some money up front to partly catch up. The bank might agree that you can pay the payments you missed when you get to the end of your loan. The bank might even agree to lower your interest rate or change from an adjustable rate to a fixed rate. You should talk to the bank's "loss mitigation department" to see if they will make an agreement with you. Make sure you get a signed agreement from the bank. Also, talk to the court and make sure that the foreclosure court case is stopped.

Can I sell in the Redemption Period?
Yes. If you can't save your home, you can sell it in the Redemption Period. You will have to pay the bank the full amount that the court says you owe. You will have to pay off any other liens or mortgages on the home too. You get to keep the rest of the money from the sale. This is called your equity. (If you owe more than the home is worth, you have no equity. In that case, you should talk to the bank about selling. The bank might agree to have you sell for less than you owe. This is called a short sale.)

What happens when the Redemption Period ends?
What happens next depends on if you have equity in the home.

Certificate of Non-Redemption
The bank will send the court a paper asking the court to confirm that you did not redeem the home. This is called a Certificate of Non-Redemption. This means you did not refinance or sell or do a Chapter 13 bankruptcy or a loan modification before the Redemption Period ended. The court will say what happens next, either foreclosure by sale or strict foreclosure.

Foreclosure by sale
If the home is worth more than you owe, you have equity. If you have equity, the bank will set a sale date for your home. You can save your home if you refinance before the sale date. You can do this even after the Redemption Period is over. If you do not refinance the bank will sell your home. If no one wants to buy it, the bank may buy it. If money is left over from the sale, after all the court foreclosure debts and sale costs are paid, you get the left over money. If the house sells for less than the total amount of the court foreclosure debts and sale costs, you might end up owing the bank money. This is called a deficiency judgment.

Strict foreclosure
If the home is worth less than you owe, you have no equity. If you have no equity, the bank just becomes the owner of the home. The bank can do whatever it wants with the home. If the bank sells the home, you will not get any money.

Writ of Possession
If you are still living in the home after the foreclosure by sale or the strict foreclosure, the bank or the new owner of the home will ask the court for a court order that says you must leave. This court order is called a Writ of Possession.

What is a deficiency judgment?
If the home is sold for less than what you owed the bank, the bank may ask the court for a deficiency judgment. This is a court order that says you owe the bank for the rest of the debt, minus the sale price. If the court makes a deficiency judgment against you, you may be able to get rid of that debt in a Chapter 7 bankruptcy.

What is a short sale?
A short sale is when you sell the home for less than what you owe the bank. You can only do this if the bank agrees. Sometimes banks will agree to this.

What is a deed in lieu of foreclosure?
Sometimes the bank will agree to take a deed to the house instead of going through the foreclosure process. This means you give the bank full ownership of the house and you lose all your rights to the house. If you don't have any equity in the house, this might be a good option for you. You should talk to a lawyer before you agree to do a deed in lieu of foreclosure.


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