H. 766  An Act Relating to Strict Foreclosure

 

 

Signed by the Governor on May 5, 2006 and became effective upon passage

 

 

Section 1:        Amended the Fraudulent Conveyance Act (Title 9, Chapter 57)

 

 -          A transfer arising out of a foreclosure of a mortgage under Title 12, Chapter 163 is NOT voidable under the Fraudulent Conveyance Act.     New subsection 9 V.S.A. Section 2292(e)(3)

 

Section 2:        Clarifies 12 V.S.A. Section 4524

 

-           The statute is now clearer in identifying how a plaintiff can obtain a Supplemental Judgment of Foreclosure specifically identifying a party who acquired an interest in the property AFTER the filing of the Foreclosure Complaint.

 

Section 3:        Amends 12 V.S.A. Section 4528

 

-         Allows the court to consider factors in determining whether to shorten the redemption period:

 

§         Value of the property in excess of the mortgage debt

§         Debt owed to junior creditors

§         Assessed, but unpaid taxes

§         The condition of the property

§         Any other equities

 

-           Provides that no decree of strict foreclosure shall be issued absent a finding by the court that there is no substantial value in the property in excess of the mortgage debt

 

§         Requires a finding by the Court

§         Based upon competent evidence (Appraisal?)

§         Value is defined as “fair market value less all reasonable expenses that would be incurred in selling the property”

 

Section 4:        Clarifies the effect of an untimely recording of the Judgment of Foreclosure under 12 V.S.A. Section 4530

 

-           Purchasers, mortgagees, and attaching creditors whose interest first arose AFTER the filing of the Complaint for Foreclosure under 12 V.S.A. Section 4523 are NOT foreclosed out if the judgment is not timely recorded (within 30 days from time of redemption pursuant to 12 V.S.A. Section 4529)

 

-           If a certified copy of the judgment is not recorded within 30 days of the time of redemption, the plaintiff may seek to establish a right of redemption for the party asserting a right under section 4530(a)

 

-           Other parties already foreclosed out do NOT get additional redemption rights.

 

 

Section 5:        Expands Power of Sale

 

-           Any mortgage or lien being foreclosed may be foreclosed by judicial foreclosure sale:

 

      • Any party may request a judicial foreclosure sale
      • A judicial foreclosure sale can be issued at the discretion of the Court
      • This applies even if the mortgage deed did not contain a power of sale.

 

 

Section 6:        Effective Date

 

            -           This Act shall take effect on passage (May 5, 2006)

 

 

 

X:\HAL\legislation\h.766 summary.doc