Texas Foreclosure Law Primer – Part 2

So you are a Texas home owner and you received a foreclosure posting – what do you do next?

This article is the second in a series of articles designed to help Texas home owners who face the threat of foreclosure.

Texas is a non-judicial foreclosure sale for non Texas equity mortgages. That is, the Trustee can conduct the sale on behalf of the lender without any court intervention. This means that the foreclosure time line is accelerated and can be completed well within 60 days if the calendar fall right.

Texas equity loans do require a court order and that process is longer.

Texas law provides that your mortgage lender must adhere to certain notice requirement contained in Texas Property Code, Section 51.002. The notices in Section 51.002 are keyed to the status of the property as a residential property, as opposed to a non-owner occupied property. Properties that serve as a primary residence receive an additional 20 day notice to cure.

While these tips are designed to Texas home owners, its helpful to home owners in other states as well. Home owners in states other than Texas are cautioned to consult their own state law.

You’re now on the clock. You must take action. This is one of those times you need to speak to someone – a confidant, a trusted family member, an attorney, a CPA, a minister – someone that will listen to you and help you through this difficult decision.

Emotions seem to taint a lot of real estate decisions. You need to speak with someone so you can bounce ideas off of them, listen to their feedback. Believe it or not, the decision you make here may not also save your home, but you may be able to save some money in the process. Each day you delay cuts down on your options and increase the costs of that decision.

Key Point 1 – Calm down and understand that you can salvage the situation. You’ve got some difficult decisions here but you can take of this situation.

So what are some of the options you should be considering?

Try to work something out with you lender.

Key Point 2 – Anything you agree to with your lender must be in writing. Do not believe a phone representative’s claim that the foreclosure will be stopped if you make a payment. It will not be stopped and you’ll lose the opportunity to save this situation. Don’t trust the lender in this situation.

File an Application for a Temporary Restraining Order

Key Point 3 – Assuming you have no other financial problems, this may be a consideration. But, the legal fees are expensive and you must provide a bond to the court. More importantly, there is no guarantee that your application for a Temporary Restraining Order will be granted. This risk-reward payoff here is not good. Texas judges are more likely to rule that bankruptcy court is a more proper forum for this action.

File Bankruptcy.

Key Point 4 – Absolutely the best option available for most people. Just get you case filed. It will give you at least 60 days breathing room, even if you filing is kicked back for some reason. It also seems to get the attention of the lender to allow you to work some out with them.

Do nothing and abandon you home.

This sounds harsh but it may be the right thing to do if you have no equity in the property. Save your money and lock up a rental before the foreclosure.

Key Point 5 – Lenders are not pursuing deficiency judgments now. Take care of your old home, don’t remove fixtures, clean it up, and make it easy for the lender to take over the property.

Under Texas law, lenders have the option of pursuing a judgment, if they so desire. This is not happening with regularity right now, but it is something that you should be aware of.

Also, under Texas law, a foreclosure of a Texas equity loan is judicial process. Also keep in mind that there is no personal liability on a Texas equity loan.

You may receive a 1099 from the lender for forgiveness of the debt. Consult with a tax professional to consider the impact on your personal return.

Foreclosure is a tough process for your entire family. Educate yourself as to your options.