Typical Sequence of Events During Foreclosure in Texas
In the State of Texas, the laws are geared towards a rapid foreclosure process; once you are in default on your loan, foreclosure can be completed in as little as 41 days. Five stages are outlined below.
Default Stage. If you are late (or behind on your payments), you are in default. The paperwork you signed when taking out the loan specifies the number of days after which you are late. This can be as little as a few days, but is often a couple of weeks. Late penalties are often applied after a few days. If at all possible, you need to catch up at this point. It only gets worse from here.
First Required Notice – The Notice to Cure. This is an official, and required, step towards foreclosure. It is considered by some as a warning shot across your bow by the lender: pay up or else. State law requires this official notice when on the path toward foreclosure. It is often sent by registered mail. The first required notice usually includes a demand to completely catch up on your payments. If you are in default and have received a Notice to Cure, you would be wise to check the paperwork you signed when taking out the loan. In particular, check for an Acceleration Clause. Also, check your Notice to Cure carefully.
Upon receiving this First Required Notice, you have 20 days to get completely caught up.
Second Required Notice – Notice of Acceleration. This also is an official, and required, step towards foreclosure. If you were not able to catch up within 20 days of receiving your First Notice, and you have received a Notice of Acceleration, the trustee has most likely been instructed to sell your property. Although this feels very personal to you, this is the bank’s way of getting their money back from their “failed” investment; i.e. your loan. They may not want to go through with the foreclosure, but they have a financial responsibility to press forward.
Notice of Pending Foreclosure Sale. The trustee will send a notice announcing the pending foreclosure sale. This notice is sent to you AND to the county courthouse. This notice announces to you that your property is to be sold at auction on the courthouse steps at the earliest opportunity. By law in the State of Texas, auctions are held on the county’s courthouse steps on the first Tuesday of the month. Specific to your situation, a twenty one day countdown is started once the Pending Foreclosure Sale has been sent/announced. At the next first Tuesday of the month following the completion of this twenty one day countdown, your property is sold on the courthouse steps.
Although you can still save your home at this point, it is much harder to do. The lender, by law, can require payment of the entire balance of your mortgage, plus legal fees, plus late fees.
The Foreclosure Sale. The lender has input into what the terms of the sale are. If the minimum bid the lender will accept is not met at the auction, the lender may choose to purchase at that bid. If the auction price is less than what you owe on your mortgage at the time the auction, the lender can still come after you for the difference. If you’ve declared bankruptcy, you may be somewhat protected depending on what the bankruptcy court determines. Although this can temporarily delay foreclosure, you may still be liable for the previously-stated difference.
Post Foreclosure. Even after your home has been sold, you can still redeem (i.e. repurchase) your property. However, you should be aware that this may come with substantial penalties. Plus, if you’ve just gone through foreclosure, very few lenders would even consider giving you another loan; the redemption amount would need to be paid with cash.
If you don’t vacate the property after the foreclosure sale, the eviction process is begun, often with involvement by law enforcement to physically remove your personal belongings.
For more information, see this article from the Dallas Fed.