The foreclosure process in Texas is a relatively quick process, currently averaging around 159 days. Don’t be caught off guard if you are facing a potential foreclosure. Read on to learn about each step in a Texas foreclosure -- from missing your first payment all the way to eviction.
Texas Mortgage Loans
When you take out a loan to purchase residential property in Texas, you typically sign a promissory note and a deed of trust. A promissory note is basically an IOU that contains the promise to repay the loan, as well as the terms for repayment. The deed of trust provides security for the loan that is evidenced by a promissory note.
Find out more in our article What’s the Difference Between a Mortgage and a Promissory Note?
To learn more about mortgage terminology, see our Glossary of Foreclosure Terms.
What Happens When You Miss a Payment
If you miss a payment, most loans include a grace period of ten or fifteen days after which time the mortgage servicer will assess a late fee. (Mortgage servicers collect and process payments from homeowners, as well as handle loss mitigation applications and foreclosures for defaulted loans.)
The late fee is generally 5% of the overdue payment of principal and interest. To find out the late charge amount and grace period for your loan, look at the promissory note that you signed. This information can also be found on your monthly mortgage statement.
Learn more about fees that the lender can charge if you’re late on mortgage payments.
What Happens When You Fall Behind in a Few Payments
If you miss a few mortgage payments, your mortgage servicer will probably send a letter or two reminding you to get caught up, as well as call you to try to collect the payments. Don’t ignore the phone calls and letters. This is a good opportunity to discuss loss mitigation options and attempt to work out an agreement (such as a loan modification, forbearance, or payment plan) so you can avoid foreclosure.
Learn the difference between a loan modification, forbearance agreement, and payment plan.
To get more information about these and other options to avoid foreclosure, see our Alternatives to Foreclosurearea.
Pre-Foreclosure Loss Mitigation Review Period
Under the federal Consumer Financial Protection Bureau servicing rules that went into effect January 10, 2014, the mortgage servicer must wait until you are more than 120 days delinquent on payments before making the first official notice or filing for any nonjudicial or judicial foreclosure. This is to give you sufficient time to explore loss mitigation opportunities. (If a servicer's sole purpose of providing a notice is to inform you that you are late on your payments and/or explain what your loss mitigation options are, the servicer can deliver the notice within this pre-foreclosure period.)
The Breach Letter
Most Texas deeds of trust contain a clause that requires the lender to send notice, which is often called a breach or demand letter, informing you that your loan is in default before it can accelerate the loan and proceed with foreclosure. (The acceleration clause in the deed of trust permits the lender to demand that the entire balance of the loan be repaid if the borrower defaults on the loan.)
The letter must specify:
- the default
- the action required to cure the default
- a date (usually not less than 30 days from the date the notice is given to the borrower) by which the default must be cured, and
- that failure to cure the default on or before the date specified in the notice may result in acceleration of the debt and sale of the property.
Texas Foreclosure Process
Most residential mortgage foreclosures in Texas are nonjudicial, which means the lender can foreclose without going to court so long as the deed of trust contains a power of sale clause. (A “power of sale clause” is a paragraph in the mortgage that authorizes the nonjudicial foreclosure sale. If there is no power of sale clause then a judicial foreclosure process is used. If the mortgage is a home equity loan, then a quasi-judicial process is used.)
Notice of Default and Intent to Accelerate
Texas law requires that the lender/servicer must send the borrower a notice of default and intent to accelerate by certified mail that provides at least 20 days to cure the default before notice of sale can be given. (The 30-day breach letter sent pursuant to the terms of the deed of trust can satisfy this requirement.) The notice is sent to the borrower’s last known address and must include the amount due and the date it must be paid.
Notice of Sale
After the cure period has expired, and at least 21 days before the foreclosure sale, the lender/servicer then sends a notice of sale (via certified mail) to each borrower who is obligated to pay the debt. The notice of sale will also be:
- posted at the courthouse door in the county in which the property is located, and
- filed with the county clerk in the county in which the property is located.
The notice of sale must include the date, time, and location of the sale, as well as a disclosure geared toward military servicemembers that they should notify the sender of the notice about their military status.
(To learn about the protections available for servicemembers facing foreclosure, see our article Legal Protections for America's Military: The Servicemembers' Civil Relief Act.)
The Foreclosure Sale
Foreclosure sales are held the first Tuesday of each month between 10:00 a.m. and 4:00 p.m. at the county courthouse. The sale must begin at the time stated in the notice of sale, but no later than three hours after the time scheduled on the notice of sale.
The property will be:
- sold to high bidder, or
- revert to the foreclosing lender and become REO.
Deficiency Judgment Following Sale
In Texas, the lender may obtain a deficiency judgment after a nonjudicial foreclosure.
When a lender forecloses on a mortgage, the total debt owed by the borrower to the lender frequently exceeds the foreclosure sale price. The difference between the sale price and the total debt is called a “deficiency.”
Example. Say the total debt owed is $200,000, but the home only sells for $150,000 at the foreclosure sale. The deficiency is $50,000.
In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount (in our example, $50,000) from the borrower. (Learn about methods that creditors can use to collect judgments.)
For nonjudicial Texas foreclosures, the lender must file a lawsuit to obtain the deficiency judgment within two years after the foreclosure sale.
Texas state law allows the borrower to receive credit for the fair market value of the property. This means the borrower is entitled to an offset in the deficiency amount if the fair market value of the property is greater than the foreclosure sale price.
Find out more about Deficiency Judgments After Foreclosure in Texas.
Texas has no statutory right of redemption after the foreclosure. (A redemption period is the legal right of a mortgage borrower in foreclosure to pay off the total debt, including the principal balance, plus certain additional costs and interest, in order to reclaim the property.) Once a home has been foreclosed, it cannot be redeemed.
Learn more about redemption periods.
Eviction Following Foreclosure
If you don’t vacate the property following the foreclosure sale, the new owner will likely:
- offer you a cash-for-keys deal, or
- take steps to evict you.
With cash-for-keys, the new owner offers you money in exchange for you agreeing to move out. This is generally cheaper and faster for the new owner than taking you to court for an eviction.
If you don't get a cash-for-keys deal, the eviction process begins when the new owner serves the former owner with three-day notice to quit (leave) and then files an eviction (forcible detainer) lawsuit. After the court grants judgment, it can issue a writ of possession after the expiration of five days. The constable or sheriff then posts a 24-hour warning at the property. If the occupants do not vacate the property, the constable or sheriff enters the property and removes the occupants and their belongings.
To learn more about foreclosure, defending foreclosure in court, loss mitigation options in foreclosure, and more, visit Nolo's Foreclosure Center.