Paul Clark
In this Blog we open the conversation with
economic loss caused by the current mortgage
crisis.
Texas Foreclosure Law
Quick Facts
- Judicial Foreclosure Available: Yes
- Non-Judicial Foreclosure Available: Yes
- Primary Security Instruments: Deed of Trust,
Mortgage
- Timeline: Typically 60 days
- Right of Redemption: No
- Deficiency Judgments Allowed: Yes
In Texas, lenders may
foreclose on deeds of trusts or mortgages in default
using either a judicial or non-judicial foreclosure
process.
Judicial Foreclosure
The judicial process of foreclosure, which involves
filing a lawsuit to obtain a court order to
foreclose, is used when no power of sale is present
in the mortgage or deed of trust. Generally, after
the court declares a foreclosure, the property will
be auctioned off to the highest bidder.
Non-Judicial Foreclosure
The non-judicial process of foreclosure is used when
a power of sale clause exists in a mortgage or deed
of trust. A "power of sale" clause is the clause in
a deed of trust or mortgage, in which the borrower
pre-authorizes the sale of property to pay off the
balance on a loan in the event of the their default.
In deeds of trust or mortgages where a power of sale
exists, the power given to the lender to sell the
property may be executed by the lender or their
representative, typically referred to as the
trustee. Regulations for this type of foreclosure
process are outlined below in the "Power of Sale
Foreclosure Guidelines".
Power of Sale Foreclosure Guidelines If the deed of trust or mortgage contains a
power of sale clause and specifies the time, place
and terms of sale, then the specified procedure must
be followed. Otherwise, the non-judicial power of
sale foreclosure is carried out as follows:
Prior to proceeding with a foreclosure,
Texas laws state that the lender must mail the
borrower a letter of demand, informing the buyer
he has twenty (20) days to pay the delinquent
payments or foreclosure proceedings will begin.
At some point after the borrowers twenty
(20) days have expired, but at least twenty one
(21) days before the foreclosure sale, a
foreclosure notice must be: 1) filed with the
county clerk; 2) mailed to the borrower at their
last known address; and 3) posted on the county
courthouse door.
The foreclosure sale must take place on the
first Tuesday of any month, even if said Tuesday
falls on a legal holiday, but only after the
proper preliminary notices have been given. The
sale is on the courthouse steps by auction to
the highest bidder for cash. Anyone may bid,
including the lender, who bids by canceling out
the balance due on the note, or some part of it.
Lenders may obtain deficiency judgments, but they
are limited to the difference between the fair
market value of the property at the time of sale and
the balance of the loan in default.
