Judicial/ Non-Judicial Foreclosure: Judicial & Non-Judicial Foreclosure
Right of Redemption / Deficiency Judgment: Yes / Yes
Timeline: 210 Days, Can vary depending on individual cases
Deed of Trust / Mortgage as Security Instruments: Deed of Trust, Mortgage
Strict Foreclosure process:
In Vermont, a Strict foreclosure process can be followed which is based on the premise that the property belongs to the lender if the borrower happens to default on their payments. The lender can take possession of the property/ arrange for its sale, if the borrower happens to break any of the conditions set fourth in the mortgage document during this period. A lawsuit is filed by the vendor before possession/ sale of the property can happen. The borrower may have to appear before the summons court where they would be advised on their rights. The trial can be avoided if the lender files for a summary judgment. The borrower has a redemption period of up to 12 months, or six months for mortgage loans taken before 1968.
Power of Sale Foreclosure process:
In a Power of Sale foreclosure process, a power of sale clause is generally included in the Deed of Trust/ Mortgage documents. The power of sale clause authorizes the lender or their authorized representative (known as the Trustee) to carry out the foreclosure proceedings in case the borrower happens to default on their mortgage payments.
Based on the type of property under mortgage, either the Judicial foreclosure method is used or the Non-Judicial foreclosure method is used.
Judicial Foreclosure process:
If the property consists of a dwelling of two units or less, which the borrower is using as their residence, the Judicial foreclosure process is followed. In this method, the lender files a lawsuit against the borrower in a courthouse located in the same county where the property is located. The court needs to verify the same and authorize the foreclosure sale. Even if the court issues a decree of sale, the sale of property can happen only after seven months of the issue.
Non-Judicial Foreclosure process:
The Non-Judicial foreclosure process can be used if the power of sale clause is present in the Deed of Trust/ Mortgage documents and as long as the following conditions are not true: The dwelling is less than two units where the borrower does not reside as their principal residence or the property is a farm land. In such cases the lender can exercise their power of sale without having to obtain a foreclosure decree. The following guidelines can be followed for the Non-Judicial foreclosure process.
A notice of intent to foreclose is sent before thirty days of publishing the foreclosure sale to the borrower at their last known address by registered mail (acknowledgement receipt requested).This notice should contain all the details of the mortgage property (to be foreclosed), conditions in the mortgage document that are breached, total amount due to the lender, time available for the lender, etc. This notice should inform the borrower that they have up to 60 days before they receive the notice of sale. The borrower can prevent the foreclosure sale by paying up all their dues along with any other costs, before the actual sale date. The notice of sale should be in the prescribed format for the state of Vermont.
The foreclosure sale is usually held where the property is located, unless required otherwise by the court. Any member of the public (including the lender) may bid at the foreclosure sale and the property is sold off to the highest bidder.
The borrower would receive any surplus arising out of the sale (after deducting all their dues) and the lender can sue the borrower if the value offered by the highest bidder is less than the total amount due to the lender.