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Foreclosure Process in Texas: Steps & Solutions

BY DFW PROFESSIONAL HOME BUYERS

BY DFW PROFESSIONAL HOME BUYERS

This article will explain the foreclosure process in Texas. We cover why foreclosure happens, and how we can help you find a solution.

 

If you’re facing foreclosure, learn the severe impact it could have on your life. Some possible outcomes are lawsuits, taxation on deficiencies, and an impacted credit score.

 

This could result in harming your financial stability and your chances of qualifying for mortgages or credit in the future. By acting quickly you can ensure that none of these financial penalties are levied against you.

Going through a foreclosure is stressful and damaging, but there are options to avoid it. Many homeowners are finding themselves facing difficult economic situations. We have options for people asking themselves “How do I sell my house fast and avoid foreclosure?” If you are looking for a fast solution to your situation, DFW Professional Home Buyers can help. Give us a call at 817-442-7702 to discuss your situation.

A Texan family is losing their house to foreclosure and mortgage laws in Texas
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Foreclosure is when a lender takes possession of a mortgaged property using legal measures. When a foreclosure occurs, a lender attempts to recover the loan balance from an individual, or borrower, who has failed to make payments.

What Are the Differences Between Foreclosure and Pre-Foreclosure?

Pre-foreclosure is the beginning of the foreclosure process. During pre-foreclosure, the lender files a non-payment notice on the property. This notice lets the borrower know the lender will take legal action against them if the debt is not repaid. Foreclosure is the legal action that results from pre-foreclosure when a debt is not paid, and the step before the eviction process occurs.

What is the Difference Between a Judicial and Non-Judicial Foreclosure in Texas?

Infographic created by real estate investors, DFW Professional Home Buyers that shows definition of Deed in Lieu of Foreclosure in Texas
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There are two types of foreclosure, judicial and non-judicial. A judicial foreclosure process in Texas requires the lender to appear in court before they can get a mandate to auction off the property legally.

Non-Judicial foreclosure in Texas is simpler and easier than the traditional foreclosure process. Non-judicial foreclosure allows the lender to quickly seize the property by the insertion of a clause into the mortgage deed.

Short-Sale vs. Foreclosure

A short sale and foreclosure are both options for homeowners who get behind on their mortgage payments. This situation can occur if a homeowner owes more money on their mortgage than the property’s value at the time the borrower wants to sell. During a short sale, the borrower is asking the lender to accept less money than the amount of the mortgage.

Foreclosure occurs when the borrower is at least three months behind on their mortgage payments. This results in the lender taking legal action to recover the money owed on the mortgage.

 

A short sale may be the most beneficial option in this situation because:

 

  • Reduces or eliminates mortgage debt
  • Makes some borrowers eligible for relocation assistance
  • Allows borrowers to start repairing their credit sooner
  • Helps the borrower avoid the negative impact of foreclosure

What is the Foreclosure Process in Texas?

The foreclosure process in Texas is straightforward and occurs in this order:

 

  • Notice of default and intent to accelerate
  • Notice of sale
  • Foreclosure sale
An infographic created by DFW Professional Home Buyers on the foreclosure process in Texas
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Notice of Default and Intent to Accelerate

Lenders in Texas by law must send borrowers a notice of default and an intent to accelerate sent by certified mail. The notice of default grants the homeowner at least 20 days to make their payments before a notice of sale can be given.

 

Please note: A 30-day breach letter sent under the terms of the deed of trust can satisfy this requirement. The notice of default is sent to the borrower and includes the amount due and the due date.

Notice of Sale

Once the cure period expires and at least 21 days before the foreclosure sale, the lender sends the notice of sale through certified mail to the borrowers named in the mortgage. The lender also files the Notice of Sale with the county clerk (in the property’s county) and posts it at the local courthouse.

 

The notice of sale must include the location of the sale and the date and time. The notice of sale also includes a disclosure for borrowers in the military that informs them to notify the lender about their military status.

Foreclosure Sale

Foreclosure sales are typically held at the property’s county courthouse during the first Tuesday of each month between 10:00 a.m. and 4:00 p.m.

 

The sale of the property must begin within three hours of the scheduled time stated in the notice of sale. The property is sold to the highest bidder during the auction.

 

The buyer might be a third party or the lender since they put in the first bid at the amount is owed.

Texas Foreclosure Notice Requirements

Before a lender can sell your home at auction, the borrower must have at least 21 days’ notice in writing. In addition to a 21-day notice, the lender must file paperwork with the clerk of courts in the property’s county.

Eviction Process in Texas After Foreclosure

In Texas, the eviction process is:

 

  • Notice
  • Court filings and hearings
  • Writ of possession

Notice

The notice is a legal document a lender must issue a borrower. The notice informs borrowers of a potential eviction in Texas.

Court filings and hearings in Texas

Lenders can begin evictions in Texas if the borrower does not vacate the premises within three days of receiving an eviction notice.

Writ of possession

In Texas, the court issues a writ of possession to the bank after it wins an eviction case. After the judgment, distressed homeowners have a minimum grace period of at least five days to vacate the bank’s property. If they don’t leave, they will be forcibly removed from the property by the sheriff.

An infographic created by DFW Professional Home Buyers on the eviction process in Texas after foreclosure
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What Are the Different Reasons Someone Would Go Into Foreclosure?

There are various reasons a person would go through the foreclosure process in Texas:

  • Adjustable-rate loans
  • Unemployment
  • Credit card debt
  • Medical expenses
  • Divorce
  • Multiple bills
  • Relocation

Adjustable-rate loans

Adjustable-rate loans become a problem when interest rates increase after the initial low rates and payments. As a result, borrowers with adjustable-rate loans are often forced to file for foreclosure or bankruptcy.

Unemployment

Unemployment is unfortunate and happens to a lot of people. Individuals who are unemployed may not have enough money to make their mortgage payments on time. With this in mind, nonpayment results in foreclosure.

Credit card debt

Many people have credit card debt for different reasons. More than half of the people in the U.S. have credit card debt. This type of debt occurs when people use their credit cards excessively and let the monthly payments add up along with interest. In as little as three or four months, credit card debt can grow out of control and lead to someone filing bankruptcy or foreclosure.

Medical expenses

Medical expenses can occur suddenly. Over 10 percent of foreclosures nationwide are due to medical costs. Health conditions that require continuous medical treatment can accrue expensive medical bills. To emphasize, this could lead to a job loss which is the second cause of foreclosure.

Divorce

black background with pink broken heart representing divorcing couples in texas
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Divorce causes emotional and financial stress. Due to the expensive cost of divorce, many people are left with little to no money. As a result, this can lead to people filing for bankruptcy or falling into foreclosure.

Multiple bills

Texan carries a lot of debt including mortgage and car notes
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Successfully running a household requires people to pay numerous bills throughout the month. One late payment can cause a delay in other household payments, which is a dangerous cycle to break.

Relocation

A map showing a Texan relocating to another city and having to pay two mortgages
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Whether someone is moving locally or long distance, moving is expensive. Sudden relocations are the most costly type of move because there is no time to plan things and find reasonable prices, which causes people to focus on expenses other than their mortgage. Paying one mortgage is more than enough, and adding another mortgage further complicates financial matters.

How to Stop a Foreclosure in Texas?

To stop the foreclosure process in Texas, the borrower can:

  • Get a forbearance agreement
  • Get approved for a loan modification
  • File Chapter 13

Forbearance agreement

A forbearance agreement is an option to stop foreclosure temporarily when an individual is not able to pay their mortgage. The lender can issue a forbearance agreement which gives the borrower more time to pay their mortgage.

Loan modification

A loan modification may be an option under the Home Affordable Modification Program (HAMP). This program can stop the lender from proceeding with the foreclosure process if the application is accepted.

Filing Chapter 13

Filing Chapter 13 bankruptcy becomes an option to stop foreclosure if the forbearance agreement is denied. Implementing this option terminates the foreclosure process due to an automatic stay when the borrower petitions the court.

The borrower’s attorney will propose payment terms to a court to allow the borrower to catch up on their payments. In general, a borrower is granted three and five years to catch up on delinquent payments.

What is a Deed in Lieu of Foreclosure?

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A Deed in Lieu of Foreclosure is a notarized document that transfers the title of a home from the borrower’s name to the name of the lender. This title-transferring document can be suggested and used when a home is not in foreclosure.

How Can Borrowers Avoid Foreclosure?

There are different ways borrowers can avoid foreclosure, including:

  • Not ignoring the problem
  • Contact the lender
  • Respond to mail from the lender
  • Know your rights and options
  • Contact a housing counselor
  • Prioritize spending
  • Use assets

Don't ignore the problem

Many homeowners want to ignore the financial issues they’re experiencing. Unfortunately, that’s not the best way to handle a foreclosure. Once a homeowner accepts they’re in financial trouble, they can focus their efforts on other aspects of the situation. Homeowners need as much help as possible to avoid the foreclosure process.

Contact the lender

Borrowers need to contact their lender to let them know they might miss a few payments. Some lenders are willing to work with borrowers who are struggling to make payments.

Respond to the mail from the lender

Don’t leave the letter in the mailbox or throw the letter away. Contact the lender to discuss the payment options available and what they can do to help you get back on track with your payments.

Know your rights

The more a borrower knows about the foreclosure process, the better they can prepare necessary documents therefore preventing the foreclosure and eviction process from occurring.

Contact a Housing Counselor

Housing counselors can provide insight into a foreclosure situation and next steps. Counselors help borrowers avoid making the same mistakes in the future. Usually, this type of counselor can pinpoint errors borrowers are making and offer a solution. Some solutions may be short-term or long-term.

Prioritize spending

Don’t fall into the buyer’s remorse trap. Many borrowers realize they don’t have the money they thought they had, which puts them further in debt.

 

Create a spending plan can help with paying household bills, including the mortgage. Less debt results in people enjoying a more comfortable style of living with less stress and more peace of mind.

Use assets

To help reinstate a mortgage, you can use available assets. Not only can you use a whole life insurance policy, but also, cars, jewelry, and other items of value.

 

You can get a second job or find another way to generate income. This strategy demonstrates you are putting forth an effort to make the payments to keep your home.

 

People fall upon hard times, and it may seem there is no hope. Since January 2014, one in every 1,058 U.S. homes received a foreclosure filing. Having a foreclosure filed can be harmful, but there are ways foreclosure can be avoided.

 

As can be seen, it’s in the homeowner’s best interest to know everything about foreclosure in Texas. For this reason, use this article as a reference for answers regarding the process. The strategies in this article will help you protect yourself from losing your home.

How Does a Foreclosure Auction Work?

Once a homeowner misses several mortgage payments, a lender can file the necessary paperwork to start the foreclosure process, then the eviction process. When an eviction is filed, the property goes into a foreclosure auction.

 

This auction is held by trustees who are hired by the bank. At an auction, the lender can’t profit from the auction by selling the property for more money.

How Long Does an Individual Have Before They Have to Move Out of the Property?

An individual does not have to move out of their home on the foreclosure sale date. People who are still living in the house once a foreclosure is final will need to be evicted by the new owners of the home.

 

The borrower will receive a notice at least three days prior to an eviction being filed. In some situations, lenders will pay the borrower’s moving expenses to avoid delays in the eviction process, also known as cash for keys.

How Long Does it Take for Banks to Foreclose in Texas?

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It takes approximately 60 days for a bank to foreclose on a property in Texas. There is a chance the foreclosure process will be delayed if the borrower decides to contest the action before a judge or files for bankruptcy. Foreclosure can also be delayed if the borrower seeks adjournments and delays of sales.

FAQ's

Yes, an HOA can foreclose on a home, even if the mortgage payments are current. Being late making HOA dues gives an HOA cause to start the foreclosure process.

Before a foreclosure can officially start, the lender must wait until the borrower is at least 120 days past due on payments.

Once the foreclosure process is final, an individual’s credit score can decrease by at least 100 points. The higher a person’s credit score is, the more impact a foreclosure has on their credit. It will take at least three years of on-time payments to start repairing a credit score.

Before an individual can qualify for another mortgage, they will have to wait between five and seven years. Getting another mortgage after a short sale requires at least a two-year waiting period.

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