Essentially the state of Vermont is a lien theory state. This means that the most commonly used instrument of security is the Mortgage Lien. Because of the fact that a mortgage lien does not contain a power of sale clause, and the property itself secures the loan, the only way to process a foreclosure is through the courts. This process is commonly known as a “judicial foreclosure”.
The lender is required to go to court to file a complaint, or sue if you like, the borrower. The borrower has to be in default on their mortgage loan which generally means they have missed at least three consecutive payments. The complaint is filed by means of a “lis pendens” and this goes to Superior Court in Vermont. The lis pendens is public information and it informs the public that a property will be going on sale as part of a foreclosure proceeding.
The most common procedure used in this state is “strict foreclosure”. Strict foreclosure streamlines the foreclosure process which makes it faster and therefore less expensive. If used it also indicates that the borrower will not be allowed rights of redemption, even though there are statutory rights of redemption of 6 – 12 months in this state. Other means of judicial foreclosure will allow this right.
Deficiency judgments are allowed in this state and these are applicable if the property is auctioned at a public sale for and amount which is less than the amount owed on the underlying mortgage loan. In essence the lender is allowed to further sue the borrower for an amount which is the difference between the sale and the mortgage amount owed, however they do have to take care not to sell the property too cheaply or their deficiency judgment will not be allowed.