The Foreclosure Process Explained
Foreclosure Overview and Process
Foreclosure Overview and Process
The timeline for foreclosures in Texas depends on whether the lender chooses to go to court (judicial foreclosure) or use an out-of-court process (non-judicial foreclosure). Timelines can vary depending on unique circumstances. Here is the general timeline for non-judicial foreclosures, the most common type used in Texas.
Texas is known as a title state, where the property title remains in trust until payment in full occurs for the underlying loan. The document that secures the title is usually called a deed of trust, but may also be referred to as a mortgage.
The primary method of foreclosure in Texas involves non-judicial foreclosure. Except for certain notice provisions, this type of foreclosure does not involve court action. When the deed of trust is initially signed, it will usually contain a provision called a power of sale clause that, upon default, allows a trustee to sell the property to satisfy the underlying defaulted loan. The trustee acts as a representative of the lender to effectuate the sale that typically occurs in the form of an auction. Because this is a non-judicial remedy, there are very stringent notice requirements and, to use this type of foreclosure, the legal documents are required to contain the power of sale language.
In Texas, lenders can also go to court in what is known as a judicial foreclosure proceeding, where the court must issue a final judgment of foreclosure. If the deed of trust does not contain the power of sale language, the lender must seek judicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in county court along with a lis pendens, a recorded document that provides public notice that the property is being foreclosed upon.
The documents are known as the trust, note, and, in a commercial transaction, a security agreement. Sometimes the mortgage document is combined with the security agreement. Alternatively, a mortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in the note.
Depending on the timing of the required notices, it takes approximately 60 days to effectuate an uncontested non-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files for bankruptcy.
Texas has no statutory right of redemption for properties foreclosed upon due to nonpayment of the mortgage, which would allow a party to reclaim its foreclosed property by making payment in full of the sum of the unpaid loan plus costs. The ONLY right of redemption that exists in Texas, is when real property is foreclosed upon due to nonpayment of the property taxes.
Yes. A deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage secures. These judgments are limited to the difference between the fair market value of the property (regardless of what the property sold for at the foreclosure sale) and the defaulted loan amount at the time of sale. Fair market value is determined by appraisal.