Vermont Foreclosure Law Summary 
- 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."
More information on Vermont foreclosure laws.
