SecProbe.io

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December 27, 2005

Joyce Sweeney
Accounting Branch Chief
Division of Corporation Finance
Securities and Exchange Commission
Washington, D.C. 20549

   Re: Village Bank and Trust Financial Corp.
       Form 10-KSB for the Fiscal Year Ended December 31, 2004
       Forms 10-QSB for the Fiscal Quarters Ended March 31, 2005, June 30, 2005,
       and September 30, 2005
       File No. 0-50765

Dear Ms. Sweeney:

Please accept this response to your letter dated December 13, 2005 resulting
from your review of the above referenced filings.

10-KSB for the Fiscal Year Ended December 31, 2004

Consolidated Financial Statements, page 43

Note 1 - Summary of Significant Accounting Policies, page 47

Loans held for sale, page 48

Staff Comment

1.   We note your disclosure on page 7 that the majority of residential
     mortgages made by Community First are originated on a pre-sold basis. In
     light of the fact that these loans are originated on a pre-sold basis,
     please tell us why you recognize a significant gain on sale of these loans.
     Tell us the terms of your agreements through which you pre-sell the loans
     and the typical time period between origination and the sale transaction.

Response

Community First Mortgage Corporation is a correspondent mortgage banking
company. As disclosed in the Form 10-KSB, Community First enters into
commitments to originate residential mortgage loans with permanent investors in
which the interest rate and price of the loan are determined prior to closing of
the loan with the borrower. We refer to these commitments as rate lock
commitments. The period of time between the issuance of a rate lock commitment
by Community First and the sale of the loan to the permanent investor generally
ranges from 30 to 120 days.

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Community First protects itself from changes in interest rates on loans sold by
ensuring that the investor will purchase the loan at the committed interest rate
and price. Community First locks in the loan with the investor via the internet
and receives an immediate written confirmation of the rate lock commitment (in
the form of a firm purchase agreement) from the investor. If the internet is
down, the rate lock is made over the telephone and confirmed by the investor via
facsimile transmission. As a result, Community First is not exposed to losses
nor will it realize gains or losses related to such commitments due to changes
in interest rates.

Community First recognizes a gain on the sale of a residential mortgage loan to
a permanent investor based on the difference between the selling price and the
carrying value of the residential mortgage loan. This difference results from
the following components:

     1.   An amount paid by the permanent  investor for the right to service the
          loan,  termed a servicing  release  premium.  Community  First  always
          receives  a  servicing  release  premium  from  the  sale of  loans to
          permanent investors.
     2.   Permanent  investors  quote  prices  to be paid on loans  sold to them
          based on their current market  interest  rate. The permanent  investor
          will  pay the  face  value  (par  pricing)  of the loan if it bears an
          interest  rate at the current  market.  If the interest  rate is lower
          than the current market interest rate offered,  the permanent investor
          will pay an amount  that is  discounted  from its face  value;  if the
          interest rate is higher than the current market interest rate offered,
          the permanent  investor will pay a premium on its face value.  In this
          way the permanent  investor insures that its yield on the loan is at a
          current market rate. Thus when Community First originates a loan to be
          sold to a permanent  investor,  its gain can be decreased or increased
          by a discount or premium if the interest  rate is  different  from the
          current interest rate offered by the permanent investor.
     3.   Discount  points may be paid by the borrower to Community First if the
          borrower desires to decrease the quoted interest rate.

All three of these components are taken into account when originating a loan to
ensure that Community First receives the desired gain on the loan sold. While
the contribution by each component to the overall gain on the loan sold may vary
from loan to loan, Community First normally receives between 2.00% and 2.50% of
the face amount of the loan as gain.

It is important to note that Community First receives current pricing
information on components 1. and 2. above from all of its permanent investors.
It in turn uses this pricing information from the permanent investors in pricing
loans to borrowers. Thus, the gain on the sale of the loan is known at the time
the loan is originated (which follows the rate lock commitment with the
permanent investor).

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Staff Comment

2.   Please tell us and in future filings disclose whether you have any
     recourse, retained interest or other continuing involvement with the loans
     sold. If so, tell us and in future filings disclose your related accounting
     policies.

Response

Once a residential mortgage loan is sold to a permanent investor, Community
First has no further involvement or retained interest in the loan. The loan
documents are shipped to the permanent investor and, by contract, Community
First's obligations are complete unless one of the following occurs:

     a.   Fraud  - if the  investor  determines  that  there  was  fraud  by the
          borrower or another  party in obtaining the loan and can prove this to
          Community  First,  Community  First would be obligated to buy back the
          loan at the  price  sold to the  permanent  investor  and  return  any
          servicing release premium paid by the permanent investor.
     b.   Early  Payment  Default - if a borrower  does not make the first three
          monthly  payments  on his  mortgage  loan,  Community  First  would be
          obligated  to buy  back the loan at the  price  sold to the  permanent
          investor  and  return  any  servicing  release  premium  paid  by  the
          permanent investor.
     c.   Early prepayment - if a borrower prepays the mortgage loan prior to it
          being outstanding for four months,  Community First would be obligated
          to  return  any  servicing  release  premium  paid  by  the  permanent
          investor.  Only one  permanent  investor  that  Community  First sells
          residential mortgage loans to has this term in its agreement.

Community First makes no provision on its books for the above recourse
provisions as history has shown repurchase of loans under these provisions has
been remote. In approximately eight years of operation and origination of
residential mortgage loans totaling in excess of $300 million, Community First
has been required to repurchase only one loan sold to a permanent investor.

We propose to include  disclosures in future filings as follows  (changes to the
Company's current disclosure are noted in brackets):

         Loans held for sale

         The Company, through the Bank's mortgage banking subsidiary Community
         First, originates residential mortgage loans for sale in the secondary
         market. Mortgage loans originated and intended for sale in the
         secondary market are carried at the lower of cost or estimated fair
         value on an individual loan basis as determined by outstanding
         commitments from investors [or current investor yield requirements for
         loans of similar quality and type. The Company requires a firm purchase
         commitment from a permanent investor before a loan can be closed, thus
         limiting interest rate risk]. Net unrealized losses, if any, are
         recognized through a valuation allowance by charges to income.
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         [Residential mortgage loans held for sale are sold to the permanent
         investor with the mortgage servicing rights released. Gains or losses
         on sales of mortgage loans are recognized based on the difference
         between the selling price and the carrying value of the related
         mortgage loans sold. This difference arises primarily as a result of
         the value of the mortgage servicing rights.]

         [Once a residential mortgage loan is sold to a permanent investor, the
         Company has no further involvement or retained interest in the loan.
         There are limited circumstances in which the permanent investor can
         contractually require the Company to repurchase the loan. The Company
         makes no provision for any such recourse related to loans sold as
         history has shown repurchase of loans under these circumstances has
         been remote.]

In connection with this response to your comments, we acknowledge that:

     *   the  Company is  responsible  for the  adequacy  and  accuracy  of  the
         disclosure in the filing;
     *   staff  comments or changes  to disclosure in response to staff comments
         do not foreclose the Commission from  taking any action with respect to
         the filing; and
     *   the  Company  may  not  assert  staff  comments  as a  defense  in  any
         proceeding initiated by the Commission or any person  under the federal
         securities laws of the United Sates.

If you have any questions concerning this response, please contact me at
(804)419-1232.

Sincerely,

/s/ C. Harril Whitehurst, Jr.
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C. Harril Whitehurst, Jr.
Senior Vice President and Chief Financial Officer

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