The Foreclosure Process Explained

Foreclosure Overview and Process

What is the timeline for foreclosure?

The timeline for foreclosures in Texas depends on whether the lender chooses to go to court (judicial foreclosure) or use an out-of-court process (non-judicial foreclosure). Timelines can vary depending on unique circumstances. Here is the general timeline for non-judicial foreclosures, the most common type used in Texas.

  • Homeowner gets behind on mortgage payment
  • Lender places lien on the property: 30 days
  • Lender issues Notice of Default: 90 days
  • Lender appoints Trustee and posts Notice of Sale: 21–25 days
  • Trustee sells property at public auction on courthouse steps, first Tuesday, every month
  • Homes become a REO (Real Estate Owned), if not purchased at auction

How are mortgage liens treated in Texas?

Texas is known as a title state, where the property title remains in trust until payment in full occurs for the underlying loan. The document that secures the title is usually called a deed of trust, but may also be referred to as a mortgage.

How are Texas deeds foreclosed?

The primary method of foreclosure in Texas involves non-judicial foreclosure. Except for certain notice provisions, this type of foreclosure does not involve court action. When the deed of trust is initially signed, it will usually contain a provision called a power of sale clause that, upon default, allows a trustee to sell the property to satisfy the underlying defaulted loan. The trustee acts as a representative of the lender to effectuate the sale that typically occurs in the form of an auction. Because this is a non-judicial remedy, there are very stringent notice requirements and, to use this type of foreclosure, the legal documents are required to contain the power of sale language.

Power of Sale Notice Requirements

  1. Prior to initiating a foreclosure, the lender must send a demand letter requesting the payment of past due amounts, which gives the borrower 20 days to pay any past due amounts. Otherwise, foreclosure proceedings will begin.
  2. After the 20-day notice, and at least 21 days before any foreclosure sale, further notice of the foreclosure must: (a) be filed with the county clerk in the county in which the property is located; (b) mailed to the defaulting borrower (and other creditors whose liens affect the property) and; (c) be posted at the county court where any sale would occur. This notice is referred to as the Notice of Default.
  3. Foreclosure sales must take place on the first Tuesday of each month (between 10 a.m. and 4 p.m.) at the courthouse, even if the date falls on a legal holiday. The trustee will auction the property to the highest bidder, including the lender, who is given credit for the value of the balance of any outstanding indebtedness under the loan.

In Texas, lenders can also go to court in what is known as a judicial foreclosure proceeding, where the court must issue a final judgment of foreclosure. If the deed of trust does not contain the power of sale language, the lender must seek judicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in county court along with a lis pendens, a recorded document that provides public notice that the property is being foreclosed upon.

What are the legal instruments that establish a Texas mortgage?

The documents are known as the trust, note, and, in a commercial transaction, a security agreement. Sometimes the mortgage document is combined with the security agreement. Alternatively, a mortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in the note.

How long does it take to foreclose a property in Texas?

Depending on the timing of the required notices, it takes approximately 60 days to effectuate an uncontested non-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files for bankruptcy.

Is there a right of redemption in Texas?

Texas has no statutory right of redemption for properties foreclosed upon due to nonpayment of the mortgage, which would allow a party to reclaim its foreclosed property by making payment in full of the sum of the unpaid loan plus costs. The ONLY right of redemption that exists in Texas, is when real property is foreclosed upon due to nonpayment of the property taxes.

Are deficiency judgments permitted in Texas?

Yes. A deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage secures. These judgments are limited to the difference between the fair market value of the property (regardless of what the property sold for at the foreclosure sale) and the defaulted loan amount at the time of sale. Fair market value is determined by appraisal.

What statutes govern Texas foreclosures?

The laws that govern Texas foreclosures are found in Title 5, Section 51 of Texas Code.