Under state law, Virginia homeowners who are behind on a mortgage payment typically get only one official notice before losing their home to foreclosure—a 14-day notice of sale. Fortunately, federal law prevents the bank from selling your home shortly after you miss a payment. Instead, the bank must wait 120 days before starting the foreclosure. During this time, you can pay the overdue amount or apply for loss mitigation (a foreclosure alternative), such as a loan modification. In this article, you’ll learn about the federal law that slows down state foreclosure, the Virginia foreclosure process, and other homeowner rights that might help you keep your home.
(For additional information about foreclosure, read Foreclosure and Your Home: Understanding the Process, Your Rights, and Your Options.)
120 Days to Apply for a Foreclosure Alternative
Under federal law, the servicer (the company that handles the loan account) cannot move forward with a foreclosure before the borrower is at least 120 days delinquent. The purpose of this four-month period is to give the borrower sufficient time to submit a loss mitigation (foreclosure avoidance) application. Once the bank receives a complete application, it must evaluate it, inform the borrower of the outcome, and wait for any appeal period to expire before starting the foreclosure process allowed under Virginia law.
(Learn about the four-month loss mitigation period in Delaying Foreclosure: The Dodd-Frank Act 120-Day Rule.)
Virginia Foreclosure Types
Virginia law allows two kinds of foreclosure: judicial and nonjudicial. Here’s a summary of each process.
Judicial foreclosure. This foreclosure method utilizes the court system and will begin when the bank files a lawsuit setting forth why it's entitled to sell the home at auction. If, after considering the evidence, the court agrees that foreclosure is proper, it will enter a judgment allowing the bank to facilitate the foreclosure sale and apply the proceeds toward the mortgage debt. If no one purchases the property, it will go to the lender.
Nonjudicial foreclosure. In a nonjudicial foreclosure, the lender isn’t required to sue you in court before foreclosing on your home. Instead, it will follow the steps outlined in state law. Once complete, the bank can sell the home at a foreclosure sale. Most foreclosures in Virginia are nonjudicial in nature.
(For more information about foreclosure procedure, read What Are the Differences Between Judicial and Nonjudicial Foreclosures?)
Nonjudicial Foreclosure in Virginia
A bank isn’t required to do much when pursuing a nonjudicial foreclosure in Virginia. The minimal steps require the bank to do two things: send one foreclosure notice and publish a notice of the sale in the newspaper.
Foreclosure notice. 14 or more days before the foreclosure sale, the bank or trustee (the agent for the bank) must personally deliver or mail a notice of sale (a letter stating the date and location of the auction) to the homeowner.
Newspaper publication. The bank or trustee must publish the notice of sale in a newspaper in the manner specified in the loan contract, though not less than once per week for two weeks or three days if published on consecutive days. If the loan agreement is silent on the publishing requirements, the notice must be published once per week for four weeks, or on five consecutive days.
No Right to Pay What You Owe and “Reinstate” the Loan
States often have a law that gives the borrower the ability to prevent the foreclosure by “curing the default” (getting caught up on the loan payments in one lump sum) in a process called “reinstating” the loan. Though Virginia law doesn’t give borrowers a reinstatement right, many loan contracts permit it under certain conditions. You should refer to your contract, or call the bank directly. The lender might agree to allow you to reinstate the loan.
Owing After Foreclosure: The Deficiency Judgment
Borrowers left with a mortgage balance after the foreclosure sale could face a deficiency judgment. (A “deficiency” remains when the sales price isn’t enough to fully pay off the mortgage debt.) In Virginia, the bank must file a lawsuit after the nonjudicial foreclosure and get a deficiency judgment against the borrower before it can take steps to collect the outstanding amount.
If you are liable for a deficiency judgment, you might be able to discharge it (eliminate it) in bankruptcy. To find out more about this possibility, you should consult with a knowledgeable attorney in your area.
No Right to Redeem (Buy Back) the Home After the Sale
Many states give a foreclosed homeowner time to buy back (or “redeem”) their home after the foreclosure sale. Virginia does not allow for post-foreclosure redemption.
Foreclosure Laws in Virginia
To read Virginia’s foreclosure laws, you’ll want to go to the Virginia Code (sections 55-59 to 55-66.6).
Questions for Your Attorney
- What should I do after I receive a notice of sale?
- Is it possible to submit a loss mitigation application after I receive a notice of sale?
- Can the bank collect the deficiency judgment from me or am I judgment proof?