Foreclosure is scary for any homeowner. It happens when a mortgage borrower stops making payments on the loan. Because the loan is secured, meaning that the property serves as collateral for the amount borrowed, the bank can recover the debt by seizing the home and selling it.
In Texas, this process tends to happen very quickly. Texas foreclosure laws are such that the minimum time frames between notices are shorter than they are in most other states.
So, how long does the foreclosure process take in Texas? For that matter, how does foreclosure work in Texas? Let's examine it step by step.
Beginning the Foreclosure Process in Texas: Pre-Foreclosure
Foreclosure begins with missed mortgage payments. If you haven't made your payments for a couple of months – sometimes even for just a single month – the lender will start to send you letters and make phone calls. If you can, treat these as opportunities to work out payment plans or loan modifications to get your loan up to date.
How Long Do You Have?
According to the federal law that regulates banking, you must be delinquent for 120 days before a lender can serve you with a notice of foreclosure. However, there are some independent lenders that do not fall under this law's jurisdiction and can begin foreclosure at any time after the loan goes into default.
The Next Step – Notice of Default and Acceleration
If the lender chooses to proceed with foreclosure after the minimum delinquency period has passed, they can send you a notice of default. This means that you have a specified period of time, usually a legally mandated 20 days but occasionally up to 30 days, in order to pay what you owe.
The Acceleration Clause
Texas mortgage agreements often include acceleration clauses. These give the bank the right to demand immediate payment of your entire balance if you violate the terms of the loan. If your mortgage includes an acceleration clause and you go into default, your lender may ask you to pay off the remainder of the loan or face foreclosure.
If your lender decides to take advantage of an acceleration clause, it will say so in the demand letter that you receive. However, in many cases, your lender may still be open to negotiation.
The Next Step – Notice of Sale
If you have not yet arranged to pay your amount due within the time specified, your lender may send you a Notice of Sale. Foreclosure rules in Texas require that you have at least 21 days’ notice in writing, beginning on the day the notice goes into the mail, before the lender sells your home at auction.
The lender must also post the Notice of Sale at the door of your county courthouse and file it with the clerk of that county. All notices must include the location, date, and time of the planned sale. They must also include a request to disclose military status, as special rules may apply under the Servicemembers Civil Relief Act.
What Happens at the Foreclosure Sale?
In Texas, foreclosure auctions take place at the courthouse for the county in which the property is located. They happen on the first Tuesday of every month and may be scheduled any time between 10 AM and 4 PM. The law requires that the sale begin no earlier than the time listed on the Notice of Sale and no more than three hours thereafter.
The proceedings will involve a representative of the lending entity. State law permits the lender to purchase the home as the highest bidder at auction. In bidding, the lender receives as credit the value of any outstanding debt on the mortgage.
After the Sale – Deficiency Judgment
Foreclosure rules in Texas allow lenders to secure a deficiency judgment after foreclosure. A deficiency exists if there is any amount left on the debt after the home sells at auction. For example, if the borrower owed $150,000 on the mortgage but the home sold for $125,000, there is a deficiency of $25,000.
Texas lenders may use legal action to recover this deficiency, provided that they file the appropriate lawsuit against deficient borrowers within two years of the foreclosure auction. If this happens, a borrower may be able to reduce the amount of the deficiency if he or she can demonstrate that the property's fair market value is less than the debt owed but more than the amount received from the sale.
Your Options for Avoiding Foreclosure
If you have received a demand letter or Notice of Sale, don't panic. You still have avenues you can pursue.
Proving No Power of Sale
If your loan agreement does not include a power of sale clause, which gives the lender the right to sell your property if you default, the foreclosure may have to go through court in a judicial foreclosure. This gives you more time to repay the loan or figure out another strategy. However, it is rare in Texas for a mortgage not to include a power of sale clause.
Selling Your Home
If your loan agreements do have power of sale, you can still sell your home to pay off the mortgage before the foreclosure process happens. Of course, this does usually require that you find a new place to live and move out, both of which can be costly processes. And because the foreclosure process in Texas is so quick, it can be hard to facilitate a traditional sale in time.
Sell and Stay with EasyKnock
EasyKnock's Sell and Stay program offers a solution. Through Sell and Stay, EasyKnock will buy your home from you and draw up an agreement that lets you stay in place as a tenant. You receive the equity on your property, which you can use to pay any delinquent amounts due, and you don't have to leave your home. Instead, you keep paying rent until you are ready to repurchase your home or relocate, whichever suits your needs.
The Sell and Stay qualification program tends to be quicker than a traditional sale, which is good news for Texas mortgage holders. Don't spend any more sleepless nights worrying about how you will pay your mortgage before the bank forecloses – contact an EasyKnock representative today.