Texas foreclosure law

Lenders in Texas can foreclose using a judicial or non-judicial method, depending on the mortgage contract. Both mortgages and deeds of trust are considered primary security instruments. The average Texas foreclosure takes around 60 days or two months.

Judicial foreclosure
In a judicial foreclosure, the lender files a lawsuit against the borrower at the court in the county where the property is located. If the court confirms the default, it issues a court order to foreclose and the home is sold via public auction. The judicial process is used when the contract does not include a Power of Sale, a clause that would otherwise allow the lender to foreclose outside of court.

Non-judicial foreclosure
A non-judicial foreclosure is followed when the contract contains a Power of Sale clause. The clause basically serves as a pre-authorization for the lender to sell the home if the borrower defaults on the loan. This authority can be practiced by the lender himself, or extended to a trustee.

Generally, the guidelines specified in the clause are followed during the foreclosure. However, if the clause does not specify the time, place, and other relevant terms, the foreclosure proceeds in the following manner:

1) The lender sends a letter of demand to the borrower, stating that he or she has 20 days to cure the default. If the borrower does not meet the deadline, the foreclosure process officially starts.

2) At least 21 days before the sale date, but after the 20-day period expires, the lender files a foreclosure notice at the county clerk’s office. The same notice is also posted on the courthouse door and mailed to the borrower.

3) The foreclosure sale is conducted on the first Tuesday of the month, even if the date coincides with a legal holiday. The sale is held on the courthouse steps and is open to all bidders, including the lender. The lender can bid by canceling part or all the balance on the mortgage.

Right of redemption and deficiency claims
Borrowers have no rights of redemption in Texas. This means they cannot regain possession of their home once the home is sold, even if they pay the foreclosure sale price plus associated costs.

After the sale, the lender can seek a deficiency judgment if the foreclosure is not enough to cover the delinquent amount. However, they can only sue for the difference between the remaining balance and the home’s fair market value at the time it was sold.

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