- 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
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
in the "Power of Sale Foreclosure Guidelines".
Power of Sale Foreclosure
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:
- 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 twenty (20) days to pay the
delinquent payments or foreclosure proceedings will begin.
- At some point after the borrowers twenty (20)
days have expired, but at least twenty one (21) days before the
foreclosure sale, a foreclosure notice must be: 1) filed with the
county clerk; 2) mailed to the borrower at their last known
address; and 3) posted on the county courthouse door.
- 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.
More
information on Texas foreclosure laws.
