What is Strict Foreclosure?

by Eugene Melchionne, Esq.

May 27, 2009

There are two states in the United States that follow the old British practice of ‘strict foreclosure’ – Vermont and Connecticut.  Strict foreclosure will be ordered by a court in a foreclosure proceeding when there is little or no value to be recognized for the homeowner if the property were to be auctioned.  Rather than go through the time and expense of auctioning the property to be foreclosed, the court will establish a deadline, called a ‘law day’ where the owner of the equity (the homeowner) must pay the mortgage debt in full of lose ownership in the property.

Law days continue in the inverse order of priority; that is the last lienholder is given the next opportunity to redeem the property by paying the foreclosing party in full or that lienholder’s lien on the property is extinguished.  The countdown continues until there are no lienholders left who have come onto the property after the foreclosing party.

In order to determine the various values, the Court must have an appraisal establishing the value of the property and usually an affidavit of the amount of the debt.  Then with consideration of the amounts of the other liens on the property, the simple math is to subtract the liens from the value of the property to see if there is any value for the homeowner.  In these times of falling home values, you can imagine that there is rarely a time when the home is more than the debt.  So instead of an auction sign being placed on the property, the home is silently taken by the lender.  The only exception to this process would be the presence of a Federal lien on the property which preempts state law on the subject.

“ConnecticutGene Melchionne is a bankruptcy lawyer covering the entire State of Connecticut. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

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Last modified: November 19, 2013