Answers

How are mortgage liens treated in Virginia?

Virginia is generally known as a title 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 a deed of trust. In Virginia, the mortgage serves the same purpose and generally contains the same terms as a deed of trust and serves the same function in a judicial foreclosure.

How are Virginia mortgages foreclosed?

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

Power of Sale Notice Requirements:

1. Prior to initiating a foreclosure the notice 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, the deed 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 written one-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, the lenders can also go to court in what is known as a judicial 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 the sheriff. A complaint is filed in court along with what is known a lis pendens. A lis 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 the mortgage, note, and in a commercial transaction, a security agreement. Sometimes the mortgage document is combined with the security agreement. A mortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in the note.

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 uncontested non-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files for bankruptcy.

Is there a right of redemption in Virginia?

Virginia does not have a post-sale statutory 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, a deficiency 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 the lender 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 Virginia non-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.