The Foreclosure Process in Texas
When Texas homeowners fall behind on their mortgage payments or fail to pay their property tax, they may face foreclosure proceedings initiated either by the lender or the taxing district. This measure of last resort has serious consequences, not the least of which is a significant hit to a person’s credit rating.
Here’s what Texans need to know about the foreclosure process in their state and what they can do to avoid losing their home.
Timing is Everything
If you find yourself facing a foreclosure, the best piece of advice is to act fast. The foreclosure process has deadlines you need to hit in order to remain in control of your future. Timing is everything. Missing one due date can derail your plans and cause you to loose your home.
Once homeowners are more than 120 days delinquent, federal law allows the lender to initiate foreclosure proceedings. During this pre-foreclosure period, federal law requires the lender to make contact with options for a loan modification, including programs for loans issued through the Federal Housing Administration.
At the 90-day mark, provided that no attempts to modify the loan have been undertaken, the loan servicer will send a breach letter informing you that the loan is in default. This letter contains specific information about the amount owed and what the homeowner can do to cure the default.
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The Texas Foreclosure Procedure in a Nutshell
Notice of Default
Texas has both judicial and nonjudicial foreclosures, but most residential foreclosures are nonjudicial. The nonjudicial process begins with the loan servicer sending the homeowner a letter of intent to default through certified mail. This letter states the amount owed and the due date. Homeowners have 20 days to make the payment.
Notice of Sale
If they do not respond within this 20-day period, the lender may immediately send a notice of sale to the borrower via certified mail. The lender must also post this notice on the door of the local courthouse and file it with the county clerk in the county where the property is located.
The notice of sale contains the date, time, and location of the sale. Generally, Texas foreclosure auctions take place at the county courthouse on the first Tuesday of the month. Anyone can bid on the property. Once the property is sold, the original homeowner does not have a right to buy it back.
Vacate the Property
Once the house is sold at auction, homeowners must vacate the property or face eviction proceedings initiated by the new property owner. The new owner files a notice to quit, followed by a court-issued writ of possession. Once the writ has been granted, the former homeowner has 24 hours to vacate the premises.
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Texas Foreclosure Facts
Texas has no right of redemption. Once the foreclosure proceeding takes place, homeowners cannot pay the loan balance plus costs to redeem it.
If the lender buys back the property at less than the total amount of the debt owed, they have two years to file a deficiency judgment against the homeowner.
Property tax delinquency can lead to foreclosure. You can cure the delinquency right up to the time of sale and have a period of time afterward to redeem the property.
Equity loans are treated differently. The lender must obtain a court order before they can foreclose on an equity loan.
At auction, the property will go to the highest bidder or will regress back to the lender and become a bank-owned property.
A nonjudicial foreclosure proceeding can take as little as 41 days from start to finish.
Alternatives to Foreclosure in Texas
A deed in lieu is when you voluntarily hand over the deed to the house to the lender in order to cancel the debt. In this scenario, you still lose your home, but you are proactive with the lender. This option is not typically used unless the borrower has significant equity in the home.
A short sale occurs when you negotiate with the lender to sell a property for less than what you still own on the loan because the fair market value is less than the amount owed. You can still potentially be responsible for paying the difference.
Filing Chapter 7 or Chapter 13 bankruptcy can immediately put a stop to foreclosure proceedings. Provided that the borrower qualifies, this can be a good option if you have a lot of other debt.
If you find yourself only 2-5 months behind in your mortgage loan, your best option is to take advantage of the available loan modification, remediation, and forbearance options. In the state of Texas, however, you must modify before the breach letter has been filed.
If you need to pay off debt fast to avoid the implications of foreclosure on your credit score, sell your home fast for cash. This can ease stress and allow you to regroup and move on to a better debt-free lifestyle. Plus, you won’t need to make any repairs or updates.
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