After the subprime mortgage boom in the early 2000’s and resulting mortgage crisis, foreclosures became much more common in the U.S. Many homeowners found themselves in a position where they could no longer afford a mortgage payment on a home whose value was less than the outstanding debt. Foreclosures, short sales, and even “strategic foreclosures” are not unusual.
This article provides an overview of the foreclosure process involving residential property located in Virginia. The process starts from the lender’s first late charge notice sent to the borrowers, and ends on the foreclosure sale date, when a public auction sale occurs at the county courthouse where the property is physically located.
This outline is relevant only when there is no loss mitigation effort pending with the borrower. Our focus in this article is to show only the timeline that is considered the earliest interval during which a loan would be foreclosed to completion of a sale. These requirements and timeframes are governed by the Deed of Trust in Virginia, which governs the rights of the lender, as modified by mandatory limitations and requirements imposed by insurer/guarantor regulations, Deed of Trust language, Code of Virginia statutory provisions, and applicable federal Law.
Steps in a Virginia Foreclosure
1. Late Charge Notice
A late charge notice is mailed on the 17th day of delinquency on a mortgage payment. Collection letters and notices of mitigation opportunities are usually sent between the 18th and the 37th day of the original missed due date of payment. On chronic late payment accounts, collections may begin as early as the 10th day of delinquency.
2.Notice of Default
Around the 37th day of delinquency, a HUD 1 Notice of Default and/or a breach letter is mailed to the borrower by the lender or servicer. A fair debt collection practices notice is also included in the Notice of Default letter under federal law.
- The HUD 1 letter provides seven (7) business days for the borrower to respond and provide evidence of timely payment. The HUD brochure of mortgage rights is also sent at this time.
- The breach letter provides a 30-day reinstatement period to cure the arrears, with all applicable late fees and attorney fees required to be paid to bring the debt current and cure the default.
3. Contact Continues
If the borrower cannot be reached or does not respond by phone or mail, calls and "no contact" letters will continue from the 38th day to the 61st day following the due date of the missed payment.
4. Loss Mitigation and Work Out Options Considered
At 62 days delinquent, or three (3) payments past due, the loan is assigned to a loss mitigation queue for a possible work out. Over the next 10 days the loss mitigation team will try to contact the borrower.
5. Commencement of Foreclosure Proceedings
When the loan is 72 days delinquent, if there is no contact with the borrower, the loan is referred to counsel for foreclosure to commence foreclosure proceedings.
6. Contact From Law Firm Representing Lender
Once the attorney receives the file, the law firm will notify the borrower of its representation, along with Fair Debt Collection Practices Notification. The law firm will set a projected foreclosure date that is approximately 45 days out as a foreclosure sale date. During the following 45 days, the lender’s foreclosure law firm will do the following:
- Examine title to the real estate securing the loan.
- Comply with the Federal Fair Debt Collection Practices Act by sending out a 30-day notice providing the borrower with an opportunity to contest the validity of the debt, and the amount due, along with a final warning of the pending date of foreclosure. Copies of the Virginia statutory public advertisements of the foreclosure describing the property, date and time and location of sale, and the terms of sale are provided to the borrower. These ads must run according to the following schedule: most Deeds of Trust (DOT) require ads to run for once a week for two (2) consecutive weeks. Some DOT’s require one ad for four (4) consecutive weeks prior to the sale date. The Code of Virginia only requires Mortgage Trustees to provide a 14-day notice to the borrower of the pending foreclosure sale date; however, most trustees allow a 30-day timeframe by written notice of the Foreclosure sale date. The 30-day notice is also sent to junior lien holders, homeowner associations and the IRS. This time also allows the borrower to appeal the debt. Note, however, that the Code of Virginia does NOT invalidate a sale when the notice letters have not been sent in conformance with this notice requirement. It is no defense that you did not receive a notice of the sale by mail from the lender. Plus, actual receipt is not required, just proof of mailing by the lender. If the lender failed to send the notice at all, or did not send it on time, it does not invalidate the sale. If effect, the only method of invalidating the sale’s statutory requirements is invalid advertising, mis-description of the property, or invalidity of the auction process.
- In Virginia, in cases where the loan has been identified as a “Subprime” loan, the lender and its attorney must allow an additional 30 days, if the customer contacts the lender to request a work-out of the loan. This may mean that the foreclosure sale would need to be cancelled or delayed for a 30-day period to allow the loan servicer to make a decision or determine if a work-out or loan modification is possible.
- By the time the day of the foreclosure sale arrives, a foreclosing loan will be approximately 117 days (four months) delinquent or 147 days delinquent, if the loan falls under the Subprime definition.
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