- 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.
