Vermont's Foreclosure Mediation Program

In response to the ongoing foreclosure crisis in this country, many states have implemented mediation programs to assist borrowers in finding ways to avoid foreclosure. If you are a homeowner facing foreclosure in Vermont, you may be eligible to participate in the state’s foreclosure mediation program. Read on to learn more about how the program works and how you can benefit from the process.

(To learn about other options for dealing with foreclosure, visit Nolo's Foreclosure section.)

What is Foreclosure Mediation?

Foreclosure mediation is a process that is used to help homeowners avoid foreclosure by coming up with an alternate solution that benefits both the borrowers and the lender. Mediation consists of a meeting between:

the borrowers
their lender, and
an impartial third-party (the mediator).

At the meeting, the parties discuss the borrower's financial situation and try to negotiate a way for the homeowner to keep the home or give up the property without going through a foreclosure. By working together, the parties are often able to reach an agreement.

Potential outcomes of mediation include:

loan modification
forbearance agreement
short sale, or
deed in lieu of foreclosure.

(To get information about each of these options, see our Alternatives to Foreclosure area.)

Vermont Foreclosure Process

Most foreclosures in Vermont are either by strict foreclosure or judicial sale, which means the lender has to go through state court to get one. (Learn more about the Vermont foreclosure process.)

(To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)

Vermont Mediation

Vermont law provides certain homeowners in foreclosure with the right to mediation (Vt. Stat. Ann. tit. 12 § 4631, et seq.)

Eligibility for Mediation

Vermont homeowners in foreclosure are eligible for mediation if:

the dwelling consists of four units or less, and
is occupied by the owner as a principal residence, and
the foreclosure action involves a loan that is subject to the federal Home Affordable Modification Program (HAMP) guidelines.

Home Affordable Modification Program (HAMP)

The government requires that servicers of loans owned or guaranteed by Fannie Mae or Freddie Mac participate in HAMP. To find out if either Fannie Mae or Freddie Mac owns your loan, go to www.fanniemae.com/loanlookup/ and www.freddiemac.com/mymortgage/ .

Participation in HAMP is voluntary for servicers of non-Fannie Mae/Freddie Mac loans. A current list of participating servicers is available at www.makinghomeaffordable.gov/get-assistance/contact-mortgage/Pages/default.aspx .

(Learn more about HAMP.)

Notification of Mediation

The lender will serve notice to the homeowner along with the complaint and summons. The notice will:

advise the homeowner of the homeowner's rights in the foreclosure proceedings;
state the importance of participating in mediation even if the homeowner is currently communicating with the lender or loan servicer;
provide contact information for legal services; and
include a form that can be used by the homeowner to request mediation from the court.

Requesting Mediation

The court will refer the case to mediation whenever the homeowner enters an appearance in the case or requests mediation prior to four months after judgment is entered. However, the court may:

shorten the four-month period or thereafter decline to order mediation; or
decline to order mediation if the mortgagor requests mediation after judgment has been entered and the court determines that the mortgagor is attempting to delay the case, or decline to order mediation if the mortgagor requests mediation after judgment has been entered so long as there is good cause.

Required Documentation

The homeowner must make a good faith effort to provide the mediator with information regarding his or her household income, and any other information required by HAMP unless already provided, 20 days prior to the mediation or within a time determined by the mediator.

Redemption Period

Unless the lender agrees, mediation must be completed prior to the end of the redemption period. “Redemption” occurs when a foreclosed property owner pays the entire sale price, plus certain additional costs and interest, following the foreclosure sale to reclaim the property. Many states have a redemption period during which time the borrower can redeem the property. To find out the redemption period in Vermont, go here.

After the Mediation

After the mediation is complete, the mediator must file a report within 7 days. Once the court receives the report, it will determine whether the mortgage servicer complied with:

all of its obligations under the mediation statute, and
any modification obligations under HAMP.

The court can impose sanctions, including stopping the foreclosure, if the court finds noncompliance with the mediation statute or HAMP.

Cost to Participate in Mediation

The homeowner does not have to pay a fee to participate in the mediation program, but is responsible for his or her own costs, including the cost of an attorney, if represented, and travel costs, if any.

When Mediation is Not Required

The court may determine that the parties are not required to participate in mediation if the lender files a motion and establishes to the satisfaction of the court that it has complied with the applicable requirements of HAMP and supports its motion with sworn affidavits that:

include the calculations and inputs required by HAMP and employed by the lender; and
demonstrate that the lender or loan servicer met with the mortgagor in person or via videoconferencing or made reasonable efforts to meet with the mortgagor in person.

Changes to the Mediation Program Effective December 1, 2013

Currently, the Vermont mediation program only applies when the foreclosure action involves a loan that is subject to the federal Home Affordable Modification Program (HAMP) guidelines. (Learn more about HAMP.)

However, House Bill 431 (signed into law on April 26, 2013) made changes to the Vermont mediation program. The act expands the program to:

require mediation in virtually all mortgage foreclosure actions in Vermont
makes the program permanent by repealing a provision that would have ended it on the date that the federal Home Affordable Modification Program (HAMP) was repealed, and
requires the mediator to hold a premediation telephone conference to help the homeowner and lender complete any necessary document exchange and address other premediation issues.

The new additions and changes to this section go into effect on December 1, 2013, and apply to any foreclosure proceeding instituted after that date.

Should You Participate in the Foreclosure Mediation Program?

Even though participating in Vermont’s mediation program does not guarantee that a foreclosure will be avoided, it doesn't hurt to participate in the program. The lender may be more likely to agree to a nonforeclosure solution during mediation than if you approach it outside of the program. Or you might qualify for a loss mitigation option that you hadn’t previously considered. For more information on Vermont’s foreclosure mediation program, go to www.leg.state.vt.us/statutesmain.cfm and go to Title 12, Chapter 163, § 4631 et seq.