When: The first Tuesday of every month.

Where: Usually at County Courthouse.

When: Auction typically starts at either 10am or 1pm

Primary Instruments: Promissory Note & Deed of Trust

Type of Foreclosure: Both Non-Judicial & Judicial

Timeline: Typically 60 days.  As fast as 21 days.

Right of Redemption: No, unless tax only foreclosure

Deficiency Judgments: Yes

In Texas, lenders may foreclose on a Note in default through the powers granted in the Deed of Trust (different from your Warranty Deed).  This can be either a judicial or non-judicial foreclosure process.

What’s the difference?

Judicial Foreclosure
The judicial process of foreclosure, involves the lender filing a lawsuit against you and trying to obtain a court order to foreclose.  This is used mainly for Home Equity loans and Cash out refinances.  Generally, after the Judge grants the lender permission to foreclosure, your property will be auctioned off to the highest bidder the same way as a non-judicial process.   These types of foreclosure can be stopped dead in their tracks if attacked early.

Non-Judicial Foreclosure
The non-judicial process of foreclosure is the default process for purchase loans as well as refinances that did not involve cash out; usually called rate and term refinances (you just wanted a better deal not cash out).    In the deed of trust, you pre-authorized the sale of your property in the event of a default.  The power given to the lender to sell the property will be executed by a Trustee.  This is typically the lawyer’s office sending letters informing you that you are in default the time and place they will sell the property.  These are tough to stop without the right kind of help or you paying them the monies they claim you owe.

What happens?

Prior to proceeding with a foreclosure, Texas laws state that the lender must mail the borrower a letter of demand, informing the buyer he has twenty (20) days to pay the delinquent payments or foreclosure proceedings will begin.

At some point after the borrowers twenty (20) days have expired, but at least twenty one (21) days before the foreclosure sale, a foreclosure notice must be: 1) filed with the county clerk; 2) mailed to the borrower at their last known address; and 3) posted on the county courthouse door.

The foreclosure sale will take place on the first Tuesday of any month, even if said Tuesday falls on a legal holiday.  The sale is by auction to the highest bidder for cash.  Anyone may bid, including the lender.  After the sale, the Trustee records a Deed conveying your property to the buyer even if it is your lender.  If you are still in the house, they will remove you.

The lender may then seek a judgment against you for any remaining balance owed on the Note.  The fact that they “took back” the house doesn’t necessarily relieve you of the money they claim you owe.  If they sell the house for less than you owe, they may track you down and make your life miserable by trying to extract it from you.