Video: On July 23, 2020, Vermont Legal Aid Attorney Grace Pazdan talked about the new financial help homeowners can get to pay overdue mortgage payments and other programs for homeowners who may be facing foreclosure. Watch the video on Facebook.
If you are behind on your mortgage payments and your bank is threatening to foreclose on your home, there are some things you can do. Be sure to look carefully at any paperwork you get from the court or your bank. You must meet all court deadlines.
Notice of Default
A Notice of Default is usually the first step in the foreclosure process. It will come by mail from your bank. The notice tells you which of your mortgage terms you have defaulted on. If you are behind on your mortgage payments, the notice should tell you how much you are behind on your payments and fees and how much time you have to catch up and cure the default. If you pay the money you owe by the cure date, you will avoid foreclosure.
Foreclosure Summons and Complaint
If you do not cure your mortgage default by bringing your mortgage current, the bank can file paperwork to start a foreclosure action in civil court. You will receive copies of what the bank files. It will include a Summons and a Complaint. The Summons gives you instructions on what you need to do.
You must file a written Answer within 21 calendar days of when you received the Complaint.
It is important to file an Answer. If you do not, the bank can ask the court to issue a Default Judgment. You will not get a notice if the bank asks for a Default Judgment. If the court gives the bank a Default Judgment, the bank can get a Final Judgment Order and Decree of Foreclosure against you.
Even if you do not file an Answer, the home that you live in cannot be sold by the bank less than eight months from when you get foreclosure papers. Also, you can still ask the court for mediation, even if the bank gets a Default Judgment against you.
Your Answer must be in writing and should respond directly to the Complaint. For each numbered paragraph in the Complaint, you should write a corresponding number in your Answer and say if you “Agree,” “Disagree” or “Don’t know.”
Use our Foreclosure Answer Form to respond to the Complaint.
If you have Defenses or Counterclaims against the bank, you should write those down at the bottom of your Answer. This is important because even if you answer, the court could still issue a default judgment against you if you do not raise any defenses. If you think the mortgage is illegal or invalid for some reason, write down your reasons in the Defenses section of your Answer. Or, if you think you are not behind on your mortgage, write down your reasons in the Defenses section.
A foreclosure Answer must be “verified.” That means that it must be signed under oath before a notary public. You can go to your town clerk’s office or the courthouse to get your Answer notarized for free.
If you qualify for mediation, the Summons and Complaint will include a Request for Mediation form. Fill out the form and send it to or drop it off at the court. Mediation will put the foreclosure case on hold 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.
After the Answer is filed and mediation completed, and before the court decides your case, you or the bank can do pre-trial discovery. This means that you can ask the bank to answer written questions, admit to facts, give you documents, or provide other information. The bank must answer your requests in 30 days. The bank may also send you questions, ask you to admit facts, and ask you to give them documents. You must answer the bank in 30 days.
If you and the bank agree about the facts, you or the bank can ask the court to decide the case without a trial. This is called a Motion for Summary Judgment. The motion has to be given to the court in writing. The bank usually files a Motion for Summary Judgment in a foreclosure case.
If you get a Motion for Summary Judgment, you have to respond in writing within 30 days. If you don’t respond in writing, the court can assume you agree with the motion and issue a foreclosure judgment against you.
The court can give Summary Judgment before a trial only if you and the bank agree about the facts stated in the motion. If you disagree with the facts, or think the bank is wrong or unfair, you must respond in writing.
Settlement with a Loan Modification Agreement
You can ask the bank to modify (change) your loan so that you can lower your monthly payments. This is called a loan modification. This can happen anytime during the course of the bank’s case against you: right after the case is filed, during mediation, or after judgment for the bank has been entered, as long as there is enough time for the bank to review your financial information. The sooner this happens, the better for you.
If the bank decides you qualify for a loan modification, it will usually send you a plan for a three-month trial period. During the trial period, you have to pay the new payment amount on time every month. If you do that, you can qualify for a loan modification that brings you current on your mortgage account.
If you qualify, there are several ways the bank can get you current on your account while keeping your payments affordable:
- They can add your past due payment into your unpaid principal balance and lower your interest rate.
- They can let you pay over a longer period of time.
- They can also decide that part of your debt can be paid back later.
If you sign a loan modification agreement with the bank, it will settle the foreclosure case. In most cases, the bank’s lawyer will file a motion to dismiss the foreclosure case. If you sign a permanent loan modification agreement and the bank’s lawyer does not file a motion to dismiss the case, you should file a letter with the court asking that your case be dismissed because of the modification.
Merits Hearing or Trial
If you and the bank do not agree about the facts or a loan modification and the court denies the bank’s Motion for Summary Judgment, the court will send you a notice of a trial date. The trial is your chance to tell your side of the case to the judge. You can bring witnesses, documents or other evidence to show the judge. The court usually gives notice at least two weeks before the trial date. If you have a good reason why you can’t come to court the day of the hearing, you should ask in writing for the court to reschedule the hearing. You need to do this as soon as possible and definitely before the day of the hearing.
If you don’t come to court on the day of the trial, the court can grant a judgment in favor of the bank.
If the judge gives the bank a foreclosure judgment, the court will issue a statement of what you owe on the property. This is called a “clerk’s accounting.” If you don’t agree with the amount, you only have a short period of time to let the court know that you don’t agree.
If you don’t tell the court you disagree, the court will issue a Final Judgment Order and Decree of Foreclosure. It will tell you the total amount that you owe and how much time you have to pay what you owe before the property is sold. This is called the “redemption period.”
The Final Judgment Order and Decree of Foreclosure will tell you a date when your redemption period ends. In most cases, it is about six months. If the property being foreclosed is not your primary residence, the court may give you less than six months. To redeem your property, you can pay the full amount that you owe the bank and avoid a foreclosure sale. There may be other ways to avoid the foreclosure of your home during the redemption period. For example, if your bank agrees, you could enter into a loan modification agreement. Or you could sell your home and pay off what you owe.
During the redemption period, you can stay in your home and do not have to make mortgage payments. Any amount not paid will be included in the amount you would have to pay to redeem the property, and could be included in a Deficiency Judgment (see below).
If you cannot redeem your property or work something out before the end of your redemption period, the bank will schedule a foreclosure sale of your property. The bank must give you 30 days written notice of the sale date. The bank also has to publish the sale notice in a local paper for three weeks.
If you are still living in the home, the foreclosure sale will take place at the curb of your property. Sometimes, the bank will ask the judge to allow it to evict you before the foreclosure sale. Usually, though, the bank will not evict you until after the sale.
After the foreclosure sale, the court will have a hearing to decide if the foreclosure sale followed the law. This is called a confirmation hearing. If the court confirms the sale, the property will go to the highest bidder.
If the highest bid at the foreclosure sale is less than what you owe on the mortgage, the bank can ask the judge for a Deficiency Judgment against you. A Deficiency Judgment is a court order saying that you owe the amount that the bank did not get from the sale of your property. If the bank does not ask for a Deficiency Judgment at the confirmation hearing, it cannot try to get a judgment against you later for that debt.
Many banks do not ask for Deficiency Judgments. Even if the bank gets a Deficiency Judgment against you, the law may not require you to pay it if your property and earnings are exempt from judgment. Some income and assets cannot be taken from you by your creditors. If all of your income and assets are protected by the law, you are “judgment-proof.”
Any time after the redemption period ends, the bank can ask the court for a Writ of Possession to evict you. A sheriff will serve you with the Writ of Possession. You will have 14 days to move your belongings and get out of the property. If you do not get out during the 14-day period, the sheriff can remove you.