Across the country, the most common types of foreclosure are nonjudicial and judicial. But a different kind of foreclosure called a "strict foreclosure" also exists. In a strict foreclosure, the foreclosing party (the "lender") goes to court to ask for an order declaring you in default on the mortgage and permitting it to foreclose. If the court agrees that you're in default, it will approve the foreclosure and give the title to your home directly to the lender. A foreclosure sale doesn't happen like with a judicial or nonjudicial foreclosure.
Strict foreclosure is only allowed in two states: Connecticut and Vermont. Here's how the process works in each of these states.
In Connecticut, the lender may opt to pursue a strict foreclosure if you default on the mortgage. (Conn. Gen. Stat. § 49-24). The lender begins a strict foreclosure by filing a complaint (lawsuit) with the court and serving it to you along with a summons. You'll also get information about:
If you don't respond to the suit—or if you respond, but don't have a valid defense—and the court agrees with the lender that you're in default, the lender gets ownership of your home.
The court will give you get a certain amount of time to make full payment on the debt, called "redeeming" your home, before you lose the property. The last day to redeem is called a "Law Day." If you don't redeem by the deadline, and the Law Days for any other defendants pass, title to your property will go directly to the lender.
When a borrower's total mortgage debt exceeds the foreclosure sale price, the difference is called a "deficiency." Some states allow a lender to seek a personal judgment, called a "deficiency judgment," against the borrower for this amount.
Even though a foreclosure sale doesn't happen in a Connecticut strict foreclosure, the lender may seek a deficiency judgment against you after the foreclosure. The deficiency amount will be the difference between the total outstanding debt and the property's fair market value, as determined by the court. (Conn. Gen. Stat. § 49-14).
In a Vermont strict foreclosure, the lender files a lawsuit in state court. As the homeowner, you'll get a copy of the lawsuit (the complaint) along with a summons, which will let you know how much time you get to file an answer with the court, typically 21 days. If you're in default and don't have a legal defense, the court will grant judgment in favor of the lender.
In Vermont, you get some time, called a "redemption period," to pay off the debt and stop the strict foreclosure. Under Vermont law, you get six months from the date of the foreclosure decree to redeem the home, unless the court orders a shorter time. (Vt. Stat. Ann. tit. 12, § 4941). When the redemption period runs out, the lender becomes the owner of the property.
Following the strict foreclosure, the lender can get a deficiency judgment against you by filing a separate lawsuit in court. Like in Connecticut, the deficiency amount is the difference between your total debt and the property's fair market value.
In Vermont, strict foreclosure is allowed only if the court determines that the value of your property is less than the amount of your mortgage debt. (In common lingo, the home is "underwater.") Also, if you're facing a strict foreclosure in Vermont, you can request that the court order a foreclosure sale instead of strict foreclosure. (Vt. Stat. Ann. tit. 12 § 4941).
If you have questions about the foreclosure process in Connecticut or Vermont or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.
It's also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options. You can use the Consumer Financial Protection Bureau's Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area. You can also call the Homeownership Preservation Foundation (HOPE) Hotline, which is open 24 hours a day, seven days a week, at 888-995-HOPE (4673).