Don’t be caught off guard if you're 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.
Most people who take out a loan to buy residential property in Texas sign a promissory note and a deed of trust. A promissory note is basically an IOU that contains your promise to repay the loan, as well as the terms for repayment. The deed of trust provides security for the loan that's evidenced by a promissory note.
During the preforeclosure period, the servicer can charge you late fees and, in most cases, must inform you about ways to avoid foreclosure.
If you miss a payment, most loans include a grace period of ten or fifteen days after which time the servicer will assess a late fee. Each month you miss a payment, the servicer will charge this fee. 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.
In most cases, federal mortgage servicing laws require the servicer to contact the borrower by phone and in writing during the preforeclosure period. 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—like a loan modification, forbearance, or payment plan—so you can avoid foreclosure.
Most Texas deeds of trust contain a clause that requires the lender to send a notice, which is often called a breach letter, informing the borrower that the loan is in default before it can accelerate the loan (call it due) and proceed with foreclosure. The letter must specify:
Normally, the servicer will send this letter when you're around 90 days' delinquent on the loan.
Under federal law, the servicer generally must wait until you are more than 120 days delinquent on payments before officially starting a foreclosure.
Texas law requires the servicer to 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 has to be paid.
After the cure period has expired, and at least 21 days before the foreclosure sale, the 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:
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 Legal Protections for America's Military: The Servicemembers' Civil Relief Act.)
Foreclosure sales are generally 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 the highest bidder at the sale, which is often the foreclosing lender. At the sale, the lender usually makes a credit bid. If the lender is the highest bidder, the property becomes REO.
In a foreclosure, the total debt the borrower owes to the lender frequently exceeds the foreclosure sale price. The difference between the sale price and the total debt is called a “deficiency.” For example, say the total debt owed is $200,000, but the home 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.
In Texas, the lender may obtain a deficiency judgment after a nonjudicial foreclosure. For nonjudicial 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. So, 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.
Texas has no statutory right of redemption after the foreclosure. Once a home has been foreclosed, it can't be redeemed.
If you (the foreclosed borrower) don’t vacate the property following the foreclosure sale, the new owner will likely:
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 you don't vacate the property, the constable or sheriff enters the property and removes you and your belongings.
If you need more information about how foreclosures work in Texas, or want to learn whether you have any potential defenses to a foreclosure, consider talking to a foreclosure lawyer.