Texas Home Foreclosure Process

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Types of Foreclosures

They type of foreclosure that is used depends on the type of debt that you owe. In Texas, there are three types of foreclosures:

  1. Nonjudicial foreclosure: used when the homeowner defaults on a loan used to purchase the home
  2. Judicial Foreclosure: used by a taxing authority to collect taxes owed on the property
  3. Combination Foreclosure: used when homeowner defaults on a home equity loan or a loan used to used to pay property taxes

Nonjudicial Foreclosure

Nonjudicial foreclosures are the most common type of foreclosures in Texas. They are used when the defaulted loan was obtained to purchase or refinance the home. As the name implies, a nonjudicial foreclosure permits the lender to foreclosure a home without involving a court or judge. This means that if the homeowner defaults on the purchase loan, the lender need only provide the person with the statutorily required notices to initiate the foreclosure process. The following is an overview of the steps involved in a nonjudicial foreclosure.

Step 1: First Notice

Once a loan is in default, the lender must send the homeowner a letter by certified mail notifying them that they have at least 20 days to cure the default and that failure to do so will cause the lender to accelerate the entire debt. This certified letter is called a notice of default and intent to accelerate the debt.

Step 2: Second Notice

If the homeowner fails to cure the default within the 20-day grace period, the lender will send a second letter by certified mail notifying the homeowner that the debt has been accelerated and that failure to pay the entire balance of the loan will result in the sale of the home. This certified letter is called a notice of sale and acceleration of debt. It specifies the details of the foreclosure sale such as the date, time, and location of the sale. The lender must conduct the sale on the date and time specified in the notice otherwise the lender will have to start the entire process again (first notice, second notice, ect).

Step 3: Foreclosure Sale

The foreclosure sale takes place on the first Tuesday of every month. It is held in a facility designated by the county courthouse. In most cases the home is sold for an amount less than what is owed. If this is the case, the lender has up to two years from the date of the sale to sue the homeowner for the difference. This type of civil suit is called a deficiency action. It is also important to note that there is no right of redemption for homeowners after a nonjudicial foreclosure. This means the homeowner cannot buy back their home after the sale occurs.

Judicial Foreclosure

A judicial foreclosure is used when a homeowner fails to pay property taxes. The taxing authority must file suit in the county where the property is located to have the property sold to pay the taxes that are owed. A hearing will be held during which the taxing authority must prove that taxes are in fact due. If such proof is provided, the judge will sign a foreclosure order and the property will be sold at a foreclosure sale. The foreclosure sale takes place on the first Tuesday of every month and is held in a facility designated by the county courthouse. Unlike a nonjudicial foreclosure, homeowners who have been foreclosed upon via a judicial foreclosure have a limited right of redemption. This means they have up to 2 years after the foreclosure sale to pay what is owed and get their property back.

Combination Foreclosure

Combination foreclosures are used in very limited circumstances. For example, they are most commonly used when a homeowner defaults on a home equity loan or a loan used to pay property taxes. As the name implies, a combo foreclosure has traits of both a nonjudicial and judicial foreclosure. In a combo foreclosure the lender must obtain a court order approving the foreclosure before proceeding with the process. The process is as follows:

Step 1: First Notice (same as a nonjudicial foreclosure)

Once a loan is in default, the lender must send the homeowner a letter by certified mail notifying them that they have at least 20 days to cure the default and that failure to do so will cause the lender to accelerate the entire debt. This certified letter is called a notice of default and intent to accelerate the debt.

Step 2: Application for Foreclosure

If the homeowner fails to cure the debt within the specified time period, the lender will file an application with the court requesting a foreclosure order. If the homeowner contests the application the court will schedule a hearing to determine whether the lender has the right to foreclose.

Step 3: Second Notice

If the homeowner fails to contest the foreclosure or loses at the foreclosure hearing, the court will issue a foreclosure order. This allows the lender to proceed with a nonjudicial foreclosure. At this point the lender will send the homeowner a second notice. If the homeowner fails to pay the debt, the lender can have the property sold at a foreclosure sale. The foreclosure sale takes place on the first Tuesday of every month and is held in a facility designated by the county courthouse.

How to avoid foreclosure

Disclaimer

The information in this article is for general information purposes only. Nothing on this or associated pages, comments, answers, or other communications should be taken as legal advice. The information provided is not intended to create, and viewing of this information does not constitute, an attorney-client relationship.

© 2012 Bahin Ameri

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