The Foreclosure Process and Virginia Law
The foreclosure process in Virginia is based on the title theory of property ownership. This theory holds that any property that is secured by a mortgage loan remains the property of the lending agent until the loan is paid in full. The trust deed confers ownership to the lender for the duration of the loan.
Judicial Foreclosure
The state of Virginia recognizes two methods to foreclose on property secured by a defaulted mortgage. The judicial method forces the lending agent to file a lawsuit against the borrower for payment of any amount that is in arrears. The court will typically set a deadline for the borrower to make the necessary payments. If the deadline is not met, the court will order the property to be sold.
Nonjudicial Foreclosure
The nonjudicial foreclosure process gives the lending agent the option to foreclose on the property without the need of a court order. This is done with a power of sale clause in the mortgage contract. This clause gives the lender the right to foreclose on the property once the loan has gone into default. The lending agent generally appoints a representative, called a trustee, to oversee the foreclosure process.
Power of Sale Procedures
The power of sale clause usually provides all of the necessary details to complete the foreclosure. If this information is not included in the mortgage document, then the Virginia regulations take effect. The lender must publish a notice of sale in the local paper at least once per week for four successive weeks. The borrower must receive a copy of this notice at least 14 days prior to the auction. The auction must take place within eight to 30 days of the appearance of the first notice in the newspaper.
Deficiency and Redemption
A deficiency occurs when the property is sold for less than the balance due on the mortgage loan. When this happens, the lending agent has the right to sue the borrower for payment of the deficient amount. The state does offer the borrower one final chance to keep the property, even after the sale is complete. This is accomplished by paying the full balance due on the mortgage, plus 6 percent interest. The borrower has 240 days from the date of the auction to exercise this right of redemption.
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