Texas Foreclosure Law: How The Foreclosure Process Affects You

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This section will review foreclosure laws in Texas. Because foreclosure laws vary from state to state, it is important to understand how the Texas.foreclosure process works. Remember, when you consider buying a foreclosure, the state in which the property is located determines the laws regarding the property, not the state where the buyer may reside. In many cases buyers of foreclosed homes located in Texas also live in Texas. Be aware of how state foreclosure laws may impact your personal situation. You can learn a lot about the system for foreclosure in Texas in this section, but our information is not a substitute for professional legal advice. And because every state’s laws are subject to change without notice, we recommend you consult a real estate lawyer to gain a professional opinion of our information, and your interpretation of the information, as it applies to your specific real estate investment or home purchase situation. Visit the Texas law details below to learn about how Texas foreclosure handles aspects of judicial or non-judicial availability, primary security instruments, foreclosure timelines and foreclosure filing milestones, guidelines for Power of Sale in Texas, and application of deficiency judgments. We’ll help you understand these foreclosure law terms and how Texas applies them to the process. You may or may not need to navigate through Texas’s laws in great detail during your purchase process, but smart foreclosure buyers find that learning a lot might help save a lot on a discount home purchase.
Judicial Foreclosure Available:
Yes
Non-Judicial Foreclosure Available:
Yes
Primary Security Instruments:
Deed of Trust, Mortgage
Timeline:
Typically 60 days
Right of Redemption:
No
Deficiency Judgments Allowed:
Yes
Information on Texas foreclosure laws.
In Texas, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.

Judicial Foreclosure
The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, the property will be auctioned off to the highest bidder.

Non-Judicial Foreclosure
The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below.

Power of Sale Guidelines
If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:
1. Prior to proceeding with a foreclosure, Texas laws state that the lender must mail the borrower a letter of demand, informing the buyer he has 20 days to pay the delinquent payments or foreclosure proceedings will begin.

2. At some point after the borrowers 20 days have expired, but at least 21 days before the foreclosure sale, a foreclosure notice must be:
a.  Filed with the county clerk
b.  Mailed to the borrower at their last known address
c.  Posted on the county courthouse door

3. The foreclosure sale must take place on the first Tuesday of any month, even if said Tuesday falls on a legal holiday, but only after the proper preliminary notices have been given. The sale is on the courthouse steps by auction to the highest bidder for cash. Anyone may bid, including the lender, who bids by canceling out the balance due on the note, or some part of it.

Lenders may obtain deficiency judgments, but they are limited to the difference between the fair market value of the property at the time of sale and the balance of the loan in default.

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