Are you facing foreclosure on your home? If so, we encourage you to continue reading this post, which will provide you with valuable information regarding your rights before, during, and after the foreclosure process. When money is tight and you get behind on your mortgage payments, things are already overwhelming. Notices of foreclosure only intensify the situation. If you are concerned about any communication you have received from your lender and you want a better understanding of your rights, we are certainly here to facilitate that conversation.
When you take out a loan to purchase your home, you typically sign a promissory note with the lender. This document usually contains the terms by which the loan will be repaid and you sign it because you are promising the lender that you will repay the specified amount and comply with the terms of the note. The lender typically secures the promissory note with a deed of trust or a mortgage against your home. Unlike a mortgage, the deed of trust involves a third party. You, as the borrower, are the trustor; the bank, who lent the money, is the beneficiary, and a third party is the trustee. The trustee holds title to your home until the loan is paid in full. This third party is also responsible for initiating foreclosure, and they are entitled to do so under the “power of sale” provision included in the deed of trust. Deeds of trust are the most common real estate security interest in Texas. This security provides the lender with an interest in your property. If you are not compliant with the terms of the note, the lender is entitled to seek a remedy for this non-performance.
If you miss a single payment, it is likely that your home will not immediately go into foreclosure. Most loans include a grace period of 10–15 days in which you can make your payment. After the grace period, though, the lender will likely assess a late fee and you will also be responsible for payment of that late fee. If you miss a payment, check your promissory note to determine if you are entitled to a grace period and the amount for which your lender may charge for a late payment.
Missing more than one payment causes the lender some concern about your ability to repay under the terms of the note. If you start to fall behind on a few payments, your lender will likely send you letters reminding you of your obligation to repay, the amount you owe, and the date upon which they expect to receive your payment. Most likely, your lender will also attempt to contact you by phone. As long as your lender is not harassing you, they are entitled to make such contact. You should make every effort to communicate with your lender during this time. You have the opportunity to discuss your options. You might be able to negotiate a loan modification, forbearance, or an alternative payment plan so that you can avoid foreclosure.
By law, your lender must wait until you are more than 120 days delinquent on payments before taking the first step toward foreclosure, either in a judicial proceeding or non-judicially. The length of this period provides you with ample opportunity to work with your lender to avoid losing your home, if possible. Take advantage of this time period. If you do not understand what options are being offered to you, call us. We can help!
If you do not work out the loan with your lender, you will likely receive a notice that you are in default. This is usually called a breach or demand letter. If you receive this letter, you are put on notice that the lender intends to accelerate the loan (if the terms of the note so provide) and proceed with foreclosure. An acceleration clause allows the lender to demand repayment of the entire balance of the loan if you default. The demand or breach letter must tell you certain things. It must specify the nature of the default, what action is required to cure the default, the date by which the default must be cured, and that failure to cure the default will result in acceleration of the debt and sale of the property. Texas law requires the lender to allow at least 20 days to cure the default before proceeding to sale. This notice will be sent to your last known address.
Most foreclosures in Texas are done without the intervention of a judicial process, known as a non-judicial foreclosure. If you do not comply with the demand letter, by curing the default in the specified time period, you will likely receive a notice of sale. The notice of sale is sent at least 21 days prior to the foreclosure sale and is also posted in public spaces, such as at the county courthouse in the county in which the property is located. The notice is also filed with the county clerk in the county in which the property is located. This notice will include the date, time, and location of the sale.
Foreclosure sales are conducted on the first Tuesday of every month between 10:00 am and 4:00 pm at the county courthouse. The property will be sold to the highest bidder or revert to the foreclosing lender. If the money collected at the foreclosure sale is not enough to satisfy the amount owed on the loan, the lender may obtain against you a deficiency judgment after the foreclosure sale. The lender is entitled to collect the difference between the foreclosure price and the fair market value of the foreclosed property. When the lender seeks a deficiency judgment, you should take affirmative steps to engage counsel, if you have not already done so during the foreclosure period.
Be mindful, that you are not entitled to pay the loan after the property has been sold by foreclosure sale. Texas has no statutory right of redemption. Once your home has been foreclosed, you cannot later pay the debt, even if you are now capable. Additionally, you will be required to vacate the property. You might receive an offer from the buyer to vacate if you do not leave willingly, or the new owner is entitled to take steps to evict you. If you are evicted, you must vacate within 24 hours, otherwise the constable or sheriff can enter your property to remove you, other occupants, and your personal property.
For more information regarding foreclosures and the resulting process, please call us. We want to help you understand your rights.