Kevin obtained a $350,000 home loan in Chesterfield County, Virginia. His deed of trust names Atlantic Settlement Services as trustee and Community First Bank as beneficiary. Kevin defaults, and the bank instructs the trustee to foreclose. Kevin argues that the foreclosure is invalid because the bank never went to court. A second lien holder also claims they must be notified before the sale. Which statement BEST describes the legal situation under Virginia law?
Correct Answer
A) Kevin's argument is invalid; the trustee may proceed without court involvement, but junior lienholders must receive proper notice before the sale
Kevin's argument that court involvement is required is invalid — Virginia is a non-judicial foreclosure state, and the power of sale clause in the deed of trust authorizes the trustee to proceed without any court order. However, the second lienholder's claim for notice is valid. Under Virginia Code § 55.1-321, the trustee is required to provide notice to parties who have recorded liens against the property before conducting the sale. Junior lienholders must be notified so they can protect their interests, though the foreclosure will extinguish junior liens if they do not redeem.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
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