How are mortgage liens treated in Virginia?

Virginia is generally known as atitle theory state where the property title remains in trust until payment in full occurs for the underlying loan. The document that secures the title is usually called adeed of trust. In Virginia, themortgage serves the same purpose and generally contains the same terms as adeed of trust and serves the same function in ajudicial foreclosure.

How are Virginia mortgages foreclosed?

The primary method of foreclosure in Virginia involves what is known asnon-judicial foreclosure. This type of foreclosure does not involve court action but requires notice commonly called a sale under thepower of sale. When themortgage is initially signed, it will usually contain a provision called apower of sale clause, which upon default allows anattorney to foreclose on the property in order to satisfy the underlying defaulted loan, which is sometimes referred to as anote. Because this is a non-judicial remedy, there are very stringent notice requirements and the legal documents are required to contain thepower of sale language in order to use this type of foreclosure method.

Power of Sale Notice Requirements:

1. Prior to initiating a foreclosure thenotice of foreclosure sale must be advertised at least one per day for three (3) days or once per week for two (2) two weeks in a newspaper of general circulation in the county in which the property is located. In Virginia, thedeed of trust usually contains the advertisement procedure; if no procedure is prescribed the advertisement must run for once a week for four (4) weeks. If the property is adjacent to a city it may be sufficient to advertise for five (5) consecutive days.
2. Notice of foreclosure or a copy of the advertisement must be served on the defaulted borrower at least fourteen (14) days before the sale and must provide a description of the property being foreclosed upon, and provide the time, place and terms of the sale. The foreclosure sale cannot occur earlier than eight (8) days after the first advertisement of the foreclosure sale and no later than thirty (30) days after the last advertisement.
3. The trustee or agent will auction the property to the highest bidder. Such bids are required to be writtenone-price bids, which are submitted at the sale and subject to inspection. A cash deposit of up to 10 percent of the bid price may be required unless the deed of trust requires a lower amount. The foreclosure sale may be postponed at the request of the trustee and advertisement of the postponement must take place in the same manner as the original sale.

In Virginia, thelenders can also go to court in what is known as ajudicial foreclosure proceeding, where the court must issue a final judgment of foreclosure. The property is then sold as part of a publicly noticed sale by thesheriff. A complaint is filed in court along with what is known alis pendens. Alis pendens is a recorded document that provides public notice that the property is being foreclosed upon.

What are the legal instruments that establish a Virginia mortgage?

The documents are known as themortgage,note, and in a commercial transaction, asecurity agreement. Sometimes the mortgage document is combined with thesecurity agreement. Amortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in thenote.

How long does it take to foreclose a property in Virginia?

Depending on the timing of the various required notices, it usually takes approximately 60-90 days to effectuate an uncontestednon-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files forbankruptcy.

Is there a right of redemption in Virginia?

Virginia does not have a post-salestatutory right of redemption, which would allow a party whose property has been foreclosed to reclaim that property if the property is sold under power of sale. In certain judicial foreclosures a right to redemption is permitted.

Are deficiency judgments permitted in Virginia?

Yes, adeficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage secures. This means that the borrower still owes thelender for the difference between what the property sold for at auction and the amount of the original loan.

What statutes govern Virginia foreclosures?

The laws that govern Virginianon-judicial foreclosures are found in Code of Virginia, Chapter 55 (Property and Conveyances), Chapter 4, (Form and Effect of Deeds and Covenants; Liens) inclusive of §55-48 through §55-79.06. To view these statutes on the Web, you can visit:

http://leg1.state.va.us