Foreclosures
Is the bank foreclosing on my home?
I have a loan through FHA, HUD, FmHA or VA Requirements.
Where can I get legal help?
What will happen in court?
How can I save my home in the Redemption Period?
Can I sell in the Redemption Period?
What happens when the Redemption Period ends?
What is a deficiency judgment?
What is a short sale?
What is a deed in lieu of foreclosure?
What is Cash for Keys?
Other places to get help
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.
TIP If you get served with papers that say you have a right to mediation, you should fill in your name,
address and phone number on the form and send it to the court right away.
Mediation will stop the foreclosure case and get you a meeting with the bank
and a neutral person called a mediator. At the meeting, the bank has to
consider you for an affordable loan modification or other options that could
help you save your home. Click here for more information about
mediation.
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.
Where can I get legal help?
Do you have a low income? Or are you 60 years old or older? You may be able to get free legal help from Vermont Legal Aid or Legal Services Law Line of Vermont. Call Vermont Legal Aid at (800) 889-2047 to find out.
If you don't qualify for free legal help, you can find a lawyer through the Vermont Bar Association's Lawyer Referral Service.
What will happen in court?
A foreclosure case in court usually takes about 8 months. Some cases take much longer.
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.
Get advice from a lawyer.
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.
Mediation
You may have a right to try to save your home through a meeting called mediation. Mediation is a meeting with the bank and a neutral
person called a mediator to talk about ways that you could save your home.
If the sheriff serves you with legal papers and the top page tells you
that you have a right to mediation, you should fill out the request form
and send it to the court.
You can also use this Request for Foreclosure Mediation form.
The court will order mediation and you will get a list of
mediators to choose from.
Even if you were not served with a notice about your right to mediation,
you may still be able to get mediation. Call the Foreclosure Mediation
Project at(802) 839-1339 to find out if you qualify for mediation.
Once you and the bank decide on a mediator, the mediator will ask you
to fill out some financial documents and get two copies of recent paystubs or other proof of income.
You can find the financial forms here
and here.
At the meeting, the Bank will have to look at your financial information
and see if you qualify for an affordable loan modification. Under the federal
Home Affordable Modification Program, you could get a loan modification
that lowers your mortgage payments to only 31% of your income. For more
information on the Home Affordable Modification Program go to
www.makinghomeaffordable.gov.
Even if you have no income or cannot get a loan modification, you could still make a deal with the Bank that is better than foreclosure.
Read How Mediation Can Help Save Your Home
to see what your options are in mediation.
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.
Here is an Answer
form you can use. 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 called
Application to Proceed In Forma Pauperis. If 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 may have to sell your home.
If you were served with a paper that says you have the right to mediation,
you can ask for mediation even if you are already in the Redemption Period.
You could still qualify for mediation even if you did not get a notice about
your right to mediation. To find out if you qualify call the Foreclosure
Mediation Project at (802) 839-1339.
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.
Work Out Agreement or Loan Modification
Sometimes, in the Redemption Period, the bank will make a deal so you can keep your home. The bank
does not have to agree to this. But sometimes the bank wants to make a deal instead of getting your home.
Vermont Homeownership Centers can help.
Here is a list of the Vermont Homeownership Centers:
The Vermont Department of Banking, Insurance, Securities,
and Health Care Administration (BISHCA) can also help negotiate and help get the bank to call you back if they're not calling you.
Call them at 1-888-568-4547.
Under the federal Home Affordable Modification Program, you could qualify
for a loan modification that lowers your payment to only 31% of your income.
If you qualify, the bank has to lower your payments. To find out whether you
qualify and how to ask for a loan modification, go to
www.makinghomeaffordable.gov.
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. You will have 10 days from the time you are served with the
Writ to move out of the property.
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.
What is Cash for Keys?
Sometimes the bank will agree to give you some money for moving costs if you
agree to give the bank your house. This is called cash for keys. If the bank
agrees to do this, you should make sure the bank will give you enough time
to move out of your house.
Other places to get help:
Vermont Homeownership Centers
Neighborworks
USDA Rural Development- Rural Housing Service
Vermont Department of Banking, Insurance, Securities & Health Care Administration (BISHCA)
Vermont Legal Aid
Vermont Bar Association
Vermont Law Help, 2009.
This is a website about Vermont law. We give this information
as a public service. It is not legal advice. We are not acting as your
lawyer.
Always consult a lawyer, if you can, before taking legal action.
