If a homeowner fails to make the monthly payments required by their home loan, the bank will eventually move to recover their investment through the foreclosure process. A foreclosure is the process that allows the bank to recover the balance of the loan through an auction process. There is a myth that foreclosure is a process where a bank automatically takes ownership and possession of the property when the homeowner is in default; this is not true. Foreclosure is a legal process that requires an auction process to protect the homeowner by ensuring that they receive the fair market value of the property towards the loan.
There are two types of foreclosure processes that vary from state to state; The first is a judicial foreclosure and the second is a non-judicial foreclosures. In short, a judicial foreclosure must first go through court process through a civil lawsuit where the bank sues the homeowner for failure to make payments. The second is a non judicial foreclosure which allows the bank to sell the property through the auction process without court supervision or permission. In order to proceed with a non-judicial foreclosure, the bank must have a deed of trust or power of sale which gives them the ability to proceed to auction without court supervision.
Texas is a combination of a judicial and non-judicial foreclosure state; in short it allows for non-judicial foreclosures but ONLY if the lender or lienholder has a deed of trust as stated previously. Without a deed of trust the lender must obtain a court order to proceed with the foreclosure sale. So what is required in a non-judicial foreclosure; Provided that the bank has a deed of trust, if the property is the borrower’s residence then a notice must be sent giving the homeowner at least 20 days to get the loan caught up. This is called the Notice of Default, or Notice to cure. The name placed on top of the notice is not as important as the contents of the notice. In essence, the bank must give the homeowner a chance to repay any missed payments, late fees, attorneys fees and any other legal miscellaneous fees.
Once the 20 days have passed and the homeowner has not gotten the loan caught up, then the bank can send an acceleration letter or notice of sale. This letter must notify the homeowner that the property will be sold in 21 days or more at the next auction. Once the bank sends this letter, it is important to know that they are no longer required to accept the amount past due. At this point they are entitled to the entire amount of the loan. If it is not paid, then the bank can proceed with the auction sale.
Do not make the mistake in ignoring the first 20 day letter! This is likely the last opportunity to get the loan caught up as it is unlikely to have the entire loan balance within 21 days.
As a short recap, Texas’ foreclosure process generally does not require a court order as long as the lender has a deed of trust; if so, the lender first must give the borrower a 20 day notice allowing them to get the loan caught up. If the borrower fails to cure the default, then the bank can set the sale of the property by giving at least 21 day notice for the next sale date. Once these two notices are given appropriately the bank can proceed by selling the property at the courthouse auction which in Texas takes place on the first Tuesday of every month.
As with many of the videos in the Guerra Days digital library, this non-judicial foreclosures video is only intended as a short introduction to the Texas foreclosure process. This video is not intended as legal advice and should not be relied upon if you or someone you know is facing a foreclosure. Please make sure and get competent counsel to help you if that is the case. As always we’re available for free consultation if the need arises! Thank you!