Foreclosure Process Overview
Texas foreclosures are carried out both in court and out of court. Compared to many states, it is extremely easy to foreclose on properties in Texas and the process moves rather quickly. The entire foreclosure process can take about three months.
When no power-of-sale clause is included in the mortgage or deed of trust, the foreclosure is administered by the court. The lender files suit against the borrower to obtain a court order to foreclose on the property. Once the court declares foreclosure, the property is scheduled for public sale.
Foreclosures are more often accomplished out of court. Before starting the foreclosure process, the lender first mails a letter to the borrower which allows at least 20 days to pay the default amount on the loan. Following this time period, the lender may begin the foreclosure process by mailing a second letter to the borrower which states that the loan has been accelerated (full balance now due), and a sale has been scheduled to recover the full amount due.
Notice of Sale / Auction
The lender posts a notice of sale at the door of the county courthouse and files a foreclosure notice with the country clerk 21 days prior to the foreclosure sale. The lender also mails a copy of the notice to the borrower at the last known address 21 days prior to the sale. Texas does not require the lender to publish notice of the sale in the local newspaper.
All foreclosure sales are between 10 a.m. and 4 p.m. on the first Tuesday of the month (regardless of holidays) usually on the county courthouse steps. The sale is conducted as a public auction with the property going to the highest bidder, who pays in cash, although the trustee may allow some time (within the same day) for the highest bidder to collect the full amount. The lender is also eligible to bid on the property.
The trustee transfers ownership to the highest bidder free and clear of any junior liens but subject to any senior liens. If the bid amount is higher than the amount owed to the lender, any surplus goes to junior lien holders. In Texas, the borrower’s right of redemption after the sale does not exist. That’s why it is important that you find a way to stop foreclosure early.
Legal and Legislative Updates
The U.S. Fifth Circuit Court of Appeals held in June that servicers in Texas can proceed with a foreclosure even if they do not possess the original note so long as they have a photocopy of the note and a supporting affidavit. The decision negates the “split-the-note” theory often advanced by homeowner plaintiffs when challenging a foreclosure in the state. The crux of the theory is that the servicer must possess both the note and the mortgage assignment in order to proceed with a foreclosure. The decision negates the idea of multiple mortgage assignments by the Mortgage Electronic Registration Systems (MERS) which has prompted many of the legal challenges around the state.
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