Foreclosure is the legal process effected through the court system in which a mortgagee (lender—often a bank) terminates a mortgagor’s (borrower’s) interest in the real property in which the mortgagor gave the mortgagee a security interest (a lien) as collateral for the loan used to purchase the property.

Foreclosure generally occurs when a homeowner defaults and fails to make mortgage payments as required by the loan agreement (promissory note).

Foreclosure allows the lender to seize the property, remove the homeowner, and sell the home—all of which are legal remedies the mortgagor and mortgagee agreed to in the mortgage contract.

In Vermont, foreclosure is a judicial process, meaning that the lender must go through the courts to terminate a homeowner's interest in their property due to default on mortgage payments. When a homeowner fails to make payments as stipulated in the loan agreement, the lender can initiate foreclosure proceedings. Vermont law requires the lender to file a lawsuit and obtain a court order before foreclosing on a property. The process begins with the lender serving the borrower with a summons and complaint. The borrower has an opportunity to respond and raise defenses. If the court finds in favor of the lender, it will issue a judgment of foreclosure, and the property can be sold at auction. The proceeds from the sale are used to pay off the mortgage debt, with any surplus returned to the borrower. If the sale does not cover the debt, the lender may be able to obtain a deficiency judgment against the borrower for the remaining amount. It's important for homeowners facing foreclosure in Vermont to seek advice from an attorney to understand their rights and options.