By Katie Kellam, Esq.

BWW Law Group, LLC*

USFN Member (DC, MD, VA)

During this year’s session, the Virginia General Assembly passed a law, House Bill 2184, allowing judgment liens to be released by a settlement agent. The new code provisions will be numbered as §55.1-3100 through 55.1-3104. The authority is granted to a licensed settlement agent pursuant to the provisions of Virginia Code §55.1-1000 et seq. House Bill 2184 is set to take effect on July 1, 2023.

This is a significant development for the default industry, as it should allow settlement agents to better clear record title during purchase transactions and not leave paid judgments outstanding in the land records. Currently, in Virginia, when a creditor has gone out of business or sold debt, it is difficult or near impossible to track down that creditor to release a judgment lien. Even if the owner can certify that the debt has been paid to satisfy underwriting standards for the lender, there has been no way to release such liens non-judicially in the land records. The passage of this statute ensures that settlement agents will be able to clarify the state of title prior to the closing of a loan transaction. If a loan later goes into default, those judgment liens will no longer create a title problem as they do now, especially for GSE loans, where indemnification over such judgment liens is not permitted.

The catch is that the owner of the property must attest in an affidavit that the judgment has been paid; that the judgment has been partially paid, and that the owner has no knowledge of the balance; or that the owner is not the judgment debtor and has no knowledge of the balance. This type of affidavit would certainly be difficult to obtain during a review of title if a loan was in default, unless, for example, the borrower was deceased and their estate was assisting foreclosure counsel in proceeding with foreclosure in hopes of obtaining surplus funds.

In addition, this could be a noteworthy advancement in loss mitigation, and could allow foreclosure counsel who are certified settlement agents in Virginia to clear title for deed-in-lieu purposes. Further, it removes roadblocks that tend to stall many short sales. This would permit an additional portion of borrowers to obtain desired loss mitigation outcomes instead of having to proceed to foreclosure due to a phantom creditor being unavailable.

USFNews - May 17, 2023
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* Denotes firm is a 2022 Award of Excellence recipient