In most cases, you don’t need to worry that your mortgage holder (the “bank”) will foreclose on your home as soon as you miss a house payment. In most cases, federal law requires the loan servicer, acting on the bank’s behalf, to wait 120 days before starting a Vermont foreclosure, or a foreclosure in any state, for that matter.
After the waiting period expires in Vermont, the servicer will proceed with a foreclosure by judicial sale or a strict foreclosure. In this article, you’ll discover more about these two types of foreclosure and rights that might help you stay in your home.
When Will a Vermont Foreclosure Start?
Federal law generally requires the servicer to hold off on the foreclosure process until the mortgage payment is more than 120 days delinquent. (12 C.F.R. § 1024.41 (2025).)This preforeclosure period gives homeowners a chance to reinstate the loan (get current) or apply for another way to avoid foreclosure.
What Are My Rights Under Federal Law During Foreclosure?
If the borrower applies for a foreclosure alternative, called “loss mitigation” in the loan industry, during the 120 days, the servicer can’t start foreclosing under state law until after:
- informing the borrower of a failure to qualify for a loss mitigation alternative and the appeal period expires
- the borrower turns down the loss mitigation option offered, or
- the borrower fails to comply with a loss mitigation agreement. (12 C.F.R. § 1024.41 (2025).)
If the borrower hasn’t brought the loan current or worked out an alternative after 120 days, the servicer can begin the foreclosure using a procedure that Vermont law allows.
However, even if you don't submit a loss mitigation application before the foreclosure starts, you can still apply for loss mitigation. Then, under federal law, the servicer can’t move for a foreclosure judgment or order of sale, or conduct a foreclosure sale, until it evaluates your application. But you must submit your complete application more than 37 days before a foreclosure sale.
Suppose you submit your application 37 days or less before a foreclosure sale. In that case, the servicer has to review the application in accordance with any requirements the holder or assignee of your mortgage loan established. So, the servicer must make its best effort to review your application. But it probably won’t stop a foreclosure sale.
Is Vermont a Judicial Foreclosure State?
The two kinds of foreclosure in Connecticut are foreclosure by sale and strict foreclosure. Both types must go through the court system and receive approval from a judge. So, yes, Vermont is a judicial foreclosure state.
How Do Foreclosures Work in Vermont?
Again, a foreclosure by judicial sale or a strict foreclosure must proceed through the court system.
Foreclosure by Judicial Sale Process in Vermont
The servicer initiates this type of foreclosure by filing a “complaint” in the court and serving it on the borrower. (Vt. R. Civ. P. 80.1 (2025).) If the homeowner doesn’t file a response to the action, the bank will likely get a default judgment and win the case.
But if the borrower answers the suit, the case will move into the litigation process. If the lender prevails, the court will enter a judgment against the homeowner and set a sale date.
Strict Foreclosure Process in Vermont
A strict foreclosure and foreclosure by judicial sale follow the same basic process. But the bank won’t sell the house at a foreclosure auction.
Instead, if the foreclosed-upon homeowner fails to redeem (see below) within the time set, the court will issue a certificate that transfers the home directly to the foreclosing bank. This type of foreclosure is allowed only if the judge determines that the mortgage debt exceeds the home’s value. (Vt. Stat. tit. 12, § 4941 (2025).)
In a strict foreclosure, on a party's motion or at the court's discretion, the court may order a judicial sale instead of a strict foreclosure. (Vt. Stat. tit. 12, § 4941 (2025).)
What Options Are Available for Borrowers During Foreclosure in Vermont?
Vermont law gives the borrower the right to reinstate the mortgage after the redemption period (see below) expires, but before the sale, if both the borrower and the bank agree to it. (Vt. Stat. tit. 12, § 4948 (2025).) Or you might qualify for an alternative to foreclosure after applying for a loss mitigation option.
Vermont law also provides many homeowners in foreclosure with the right to participate in mediation. (Vt. Stat. tit. 12 §§ 4631 and following (2025).)
Does Vermont Allow Deficiency Judgments?
When the foreclosure sale price doesn't cover the borrower's mortgage debt balance, the difference between the total debt and the sale price is called a "deficiency." For example, if the borrower's total debt is $500,000, but the home sells to the highest bidder at a foreclosure sale for $450,000, the deficiency is $50,000.
If a foreclosure sale results in a deficiency, most states, including Vermont, permit the lender to get a "deficiency judgment" (a personal judgment) against the borrower.
Deficiency Judgments After Foreclosures by Judicial Sale in Vermont
Under Vermont law, as part of a foreclosure by judicial sale, the bank can ask the court for a deficiency judgment that allows it to recover the outstanding amount.
If the bank is the purchaser at the foreclosure sale, then the amount of the deficiency will be limited to the difference between the borrower’s total debt and the property’s fair market value. (Vt. R. Civ. P. 80.1 (2025).)
Deficiency Judgments After Strict Foreclosures in Vermont
The bank can also get a deficiency judgment following a strict foreclosure if it files a separate lawsuit. In a strict foreclosure, the deficiency amount is the difference between the mortgage debt and the home’s fair market value.
Does Vermont Have a Right of Redemption in a Foreclosure?
In Vermont, a foreclosed-upon homeowner can redeem the property by paying the outstanding mortgage loan plus all costs and expenses incurred in the foreclosure.
Right to Redeem in a Foreclosure by Judicial Sale
The borrower gets six months from the date of the foreclosure decree to redeem the home unless the court shortens the time. (Vt. Stat. tit. 12, § 4946(b) (2025).)
If the borrower doesn’t redeem the house within the redemption period, the sale can proceed. The borrower can redeem before the sale takes place. (Vt. Stat. tit. 12, § 4952 (2025).)
Right to Redeem in a Strict Foreclosure
The borrower gets six months from the date of the foreclosure decree to redeem in a strict foreclosure. But the court can order a shorter redemption period, or the borrower and the foreclosing bank can mutually agree to shorten the time. (Vt. Stat. tit. 12, § 4941 (2025).)
Talk to a Local Vermont Foreclosure Lawyer
This article provides details on foreclosure laws in Vermont and federal mortgage servicing laws, with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea. How courts and agencies interpret and apply the law can also change. And some rules can even vary within a state. These are just some reasons to consult an attorney if you’re facing a foreclosure.
While this article provides an overview of a typical foreclosure in Vermont, remember that state and federal foreclosure laws are complicated, and cases can proceed differently depending on the circumstances. Also, servicers and banks sometimes make mistakes or skip steps, but most foreclosure errors go uncontested. In cases where the servicer or foreclosing bank omitted a required step, made an error, or violated state or federal foreclosure laws, you could have a defense that could force it to start the foreclosure over, or you might have leverage to work out an alternative.
If you believe your rights were violated, talk to a local foreclosure attorney or legal aid office immediately. A lawyer can give you information about different ways to fight the foreclosure in court, as well as information about different ways to potentially avoid foreclosure.
A HUD-approved housing counselor can also provide helpful information (at no cost) about ways to prevent a foreclosure.