Texas Foreclosure Laws

Texas foreclosure laws allow both judicial and non-judicial foreclosure procedures. Most foreclosures in Texas, however, are non-judicial. The foreclosure process in Texas takes approximately three months in many cases and the process is relatively simple.

Pre-Foreclosure

If a deed of trust or mortgage has no power of sale clause, the lender must file in court to have the foreclosure process started. The lender must bring legal action against the debtor and the court must order a foreclosure in order for foreclosure to take place. When this takes place, the auction can be scheduled.

In Texas, however, most foreclosures are non-judicial because most deeds of trust and most mortgages in the state do have a power of sale clause. To start a non-judicial foreclosure in Texas, the lender must mail a letter to the debtor. This letter must outline the default amount and must give the debtor twenty days to pay this amount. After twenty days, if the default amount is not paid, the lender can mail a second letter. This letter declares that the full balance of the loan is due and an auction has been scheduled to recover the total amount of the loan. This is known as accelerating the loan. Until the property is actually put up for sale, the property is still in pre-foreclosure. However, in Texas the pre-foreclosure period can be short.

The Foreclosure Auction in Texas

Before the foreclosure auction can take place, the notice of sale must be posted. The notice must be filed on the courthouse door twenty one days before the auction. At the same time, the lender needs to file a foreclosure notice with the county clerk. The same day, the lender must mail a copy of the notice to the debtor. Unlike many states, Texas does not require the notice of sale to be printed in newspapers.

In Texas, foreclosure auctions are held on the first Tuesday of each month, between 10 a.m. and 4 p.m., even on holidays. Usually, these auctions take place on the courthouse steps and the highest bidder usually must pay cash. In some cases, the trustee will allow the highest bidder until the end of the day to pay the full bid amount, but bidders are exacted to arrive with the full amount they plan to bid.

Once the winning bidder has been established, the ownership is transferred to this bidder. The ownership is subject to senior liens but junior liens are cleared before the transfer of ownership takes place. If the bid amount is greater than the default amount, the excess money is given to the junior lien holders. There is no period of redemption after the auction.