- Mansfield / Dallas-Fort Worth 2170 Matlock Rd. #110 Mansfield, TX 76063
Texas Non-Judicial residential mortgage foreclosure
- Home
- Real Estate Attorney
- Residential Mortgage foreclosure
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Where it begins
Foreclosures are an integral part of the home lending process. When a borrower applies for a mortgage, they sign a promissory note acknowledging that they have borrowed the money and promise to make the repayments to pay back the loan. The borrower also signs a document called a deed of trust. The deed of trust involves three parties: the borrower, the lender, and a trustee. The trustee is an impartial party, usually an attorney, a title company, or a trust company that holds legal title to the home during the life of the loan.
In the deed of trust, the borrower puts the home up as the collateral for the loan. This creates a lien on the home. Once the loan is paid back, the lender releases the lien and legal title automatically shifts to the borrower. The loan and deed of trust may also be transferred via an assignment to a mortgage servicer after it is originated, that is quite typical with most residential mortgage loans due to the rise of mortgage servicing companies, like PHH, Roundpoint, Lakeview, Mr. Cooper, shellpoint, freedom mortgage just to name a few.
The Power of [foreclosure] Sale
A lender may either sell the property through a nonjudicial foreclosure pursuant to powers expressly granted in a deed of trust or they may bring a judicial foreclosure action. Morlock, L.L.C. v. Bank of New York, 448 S.W.3d 514 (Tex. App. Houston 1st Dist. 2014, pet. denied). The availability of the nonjudicial option all depends on what is granted in the deed of trust via the “power of sale” clause; if the nonjudicial selection is not granted, then the judicial option must be utilized.
A judicial foreclosure, as the name forecast, begins with the filing of a lawsuit in the proper court and involves a litigation process that can take a year or more to complete. On the other hand, the nonjudicial foreclosure is a much faster and economical process for a lender that can be completed in a few months as it bypasses the court system. Because of this, the nonjudicial route is the one most commonly used. The primary goal of foreclosure, of course, is to allow the lender to recover the amount owed on the defaulted loan by selling the property. The lender should be made whole. Be wary of private lenders who attempt to profit off the foreclosure process.
How a Texas foreclosure sale is conducted
Section 51.002 of the Texas Property Code details the requirements for a nonjudicial sale under the previously mentioned power of sale in the deed of trust. According to the Property Code, a sale of real property under a power of sale conferred by a deed of trust or other contract lien must be a public sale at auction held between 10 a.m. and 4 p.m. of the first Tuesday of a month. Except as provided by Subsection (h), the sale must take place at the county courthouse in the county in which the land is located, or if the property is located in more than one county, the sale may be made at the courthouse in any county in which the property is located.
What must be complied with to conduct a foreclosure sale
The deed of trust can add steps or increase time periods in the process, but it cannot shorten or remove any requirements set in the Property Code. The borrower’s right to have the requirements of the deed of trust complied with is absolute, and the terms set out in the deed of trust must be strictly followed. Slaughter v. Qualls, 139 Tex. 340, 162 S.W.2d 671 (1942).
Foreclosure sale process
In summary, the process is: 1) the lender sends a Notice of Default to the borrower, informing them that they are in default on their mortgage repayments. This notice typically gives the borrower 20 days to cure the default by paying the overdue amount. 2) If the borrower does not cure the default within the given period, the lender will then issue a Notice of Sale. This notice must be filed with the county clerk, posted at the courthouse, and sent to the borrower by certified mail at least 21 days before the scheduled sale date. 3) The trustee then holds the foreclosure sale, on the first Tuesday of the month at the county courthouse. The property is sold at a public auction to the highest bidder. 4) After the sale, the highest bidder receives a trustee’s deed, transferring ownership of the property to them, and the lender receives the proceeds of the sale to satisfy the mortgage. The excess proceeds are another area that is often a topic of concern if you have lost your home to foreclosure.
It can be as little as a month and a half before the home is sold to a new owner. Fortunately for borrowers, there are a few ways to stop a foreclosure. The simplest is to just pay the delinquent amount. A reinstatement, as it is called, is where the borrower pays all of the past months of missed repayments plus any fees or additional costs. Most of the time once this is done, a lender is prohibited from continuing with a foreclosure. Sometimes, it may be possible for the borrower to negotiate with the lender and have the lender either create a repayment plan so the borrower can make smaller repayments for the delinquent amount while still making the original repayments; modify the terms of the loan to make future repayments more manageable; or refinance the loan to replace it with a new loan with more agreeable terms.
If the borrower’s inability to repay is due to a temporary financial hardship, the lender may be willing to enter into a forbearance agreement, or a temporary reduction or suspension of repayments, to relieve the borrower for a short time. A deed-in-lieu-of-foreclosure may be an option if the lender does not want to enter into any of the above agreements. With a deed-in-lieu-of-foreclosure, the borrower voluntarily transfers ownership of the home to the lender to avoid foreclosure. While the borrower does lose the home with this option, they at least save themselves from having a foreclosure on their credit.
If the borrower owes more than the home is worth on the open market, a short sale maybe another way for a struggling borrower to avoid foreclosure. In a short sale, the borrower, with approval from the lender, sells the home for less than the total loan. Whatever proceeds are gained from the sale will go to settle the borrower’s loan. This option does impact the borrower’s credit, but at a lesser extent than a full-blown foreclosure would. The last, nuclear option is for the borrower to file for bankruptcy protection. Chapter 13 is designed to help individuals with regular income reorganize their debts and create a repayment plan to pay back all or part of what they owe over time. If there is any benefit to this option it’s that the borrower usually keeps the home. However, the borrower must adhere to the repayment plan or risk losing everything. And even if the borrower does complete the repayment, the hit to their credit will continue to follow them for years afterwards.
The most important thing for a borrower to remember is to begin communicating with the lender as soon as possible. Lenders, for the most part, will most likely be more amenable to working with a borrower that contacts them immediate when they believe that a repayment may be missed rather than a borrower who only first contacts them the day before the foreclosure sale.
Our firm specializes in looking at all aspects of a pending foreclosure to see if the requirements of the lender have been met and to find any available means by which to stop the foreclosure in its tracks, sometimes as soon as the day before the auction. We can utilize third party financing, outright purchases, Temporary restraining orders, and hold off agreements with the lenders or trustees. Contact us today for a free evaluation of your foreclosure case.
What Our Clients Say About Us
EDDIE G.
“Michael, I would like to express my thanks to you and your entire team for all your hard work in getting my case to a fair and generous settlement. I could not have asked for better legal representation for the long and nerve-racking process of my case. You are very compassionate, nice, and extremely good at what you do. I respect your dedication representing the victims of a personal injury cases.”
TINA L.
“The Farah Law Firm has an extensive knowledge of business entity transactions in Texas and had kept my transaction moving smoothly and in the right direction. Thank you Michael for making the process easy.”
ESSAM K.
“Michael drafted the lease that we will use for our commercial building. He had great communication, was readily available to answer any questions we had, and was very professional. He wrote us a lease that fit our need and I will definitely work with The Farah Law Firm again in the future.”
CHARLES B.
“I hired The Farah Law Firm for the non-traditional sale of my residential property. The Farah Law Firm’s professionalism and outstanding knowledge of residential transactions made the sale go smoothly. The Attorneys and staff at the Farah Law Firm were understanding and took the time to explain each step of the process. They will be the ones who I will refer to all my friends and family for any future legal endeavors.”
LALO T.
*Please note: Due to the costs involved and the favorability of land in Texas per contract and common law, we currently are not accepting residential tenant defense cases.
“I was referred to The Farah Law Firm by a friend of mine when I was injured in an auto accident. I am so glad that my friend referred me to Michael and his extremely helpful team. They were not only successful in getting my settlement but also helped me find great doctors to aid in my recovery from the accident. I highly recommend The Farah Law Firm.”