A mortgage is a conveyance of real property to a creditor, which contains a clause stating that if the debtor repays the obligation, title of the real property will revert to the debtor.
There are two types of mortgage theories, lien theory and title theory. The primary difference between the two is whether title of the real property passes to the creditor. The lien theory of mortgages gives the creditor a lien on the title of the real property, but the title remains with the debtor. A lien still allows the creditor the ability to foreclose (force the sale of the property) should the debtor default. The title theory of mortgages requires that actual title be conveyed to the creditor, and the debtor retains a beneficial interest in the real property. The beneficial interest allows the debtor to redeem the property upon repayment of the obligation.
Virginia Deed of Trust
Virginia is a lien theory jurisdiction, meaning that when a property is mortgaged, title does not pass to the creditor. The creditor only receives a lien on the property. However, when a debtor obtains a mortgage, the title is transferred to a trustee, and the debtor retains am equitable right to repay the indebtedness and regain title upon repayment of the obligation. The purpose of the deed of trust is to avoid the costs and delays of a judicial foreclosure.
Foreclosure in Virginia
Because a creditor has a lien on the debtor’s real property; if the debtor defaults on the obligation, a creditor may request that property be sold to repay the obligation. There are two types of foreclosure in Virginia, (See Legal Guide: Summary of Virginia Foreclosure Procedure here at avvo, www.loudounlawyer.com, or www.onlinevalegalforms.com) a judicial foreclosure and a non-judicial foreclosure. It is important to note that Virginia does not allow a mortgagee (creditor) to sell the property out of court, even if the terms of the mortgage expressly permit it. All non-judicial sales must be performed through the trustee of a deed of trust.