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Foreclosure procedure in Texas
A foreclosure generally happens when a lender
tries to repossess or sell a property when the owner/borrower
fails to meet terms and conditions of the mortgage.
The most common reason is that the borrower
fails to make agreed upon payments to the lender, but there
are other reasons that a property may be foreclosed upon such
as the inability of the borrower to obtain and keep sufficient
insurance on the property.
In the most common cases, the borrower becomes
delinquent in making payments and the loan is referred to
as being in default. When this happens, the lender can pursue
foreclosure on the property.
The foreclosure is an attempt by the lender
to satisfy the debt due, which usually entails recovering
its investment by selling the property.
There are two types of foreclosure in Texas.
The first step in determining the type of foreclosure is to
determine if a "power of sale" was included in the
contract between the lender and the borrower.
A power of sale is a clause typically included
in the mortgage that gives the lender a right to auction off
the property in the event that the loan is defaulted upon.
When a power of sale is absent from mortgage
and title documents, this is referred to as a Judicial Foreclosure,
and the lender must go to court in order to obtain the right
to foreclose. In this situation, the property is usually auctioned
off once the court orders a foreclosure.
In Texas, there is usually a power of sale clause
present in which the second type of foreclosure, called non-judicial
foreclosure, takes place.
In this situation, the lender has a right to
foreclose on the property without the aid of the judicial
system because the power of sale clause included in the contract
allows the lender to sell the property to try and recover
the balance of the loan.
How the foreclosure proceeds from this point
is determined by what was stated in the loan agreement. If
the power of sale clause states the manner in which a lender
can foreclose, then the contract will dictate the procedures.
Otherwise, there is a specific course of action that must
be followed.
When the power of sale clause does not give
specifics, the lender must first mail the borrower a notice
that all delinquent payments must be paid within twenty days.
Many lenders also assess a late fee on the sixteenth
day after a payment is due.
After twenty-one days, the lender must do the
following three things before selling the property:
1. file a notice of foreclosure with the county
clerk,
2. mail the notice to the borrower and
3. post the notice on the county courthouse
door.
The property is put up for auction and the sale
of property must always take place on the first Tuesday of
the month between 10 a.m. and 4 p.m. at the courthouse of
the county where the property is located.
Unfortunately, there is no right of redemption
in Texas, which means that if the home is foreclosed on,
there is no means by which the borrower can attempt to reacquire
the property by paying off what was owed after the foreclosure
sale.
For this reason, it is important that anyone
facing foreclosure take appropriate steps to remedy the situation
as quickly as possible.
If you are facing foreclosure
or if you think you will in the future call us for a FREE
Situation Analysis to determine your best plan of action.
713-782-5626
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