In both a judicial and non-judicial foreclosure, the foreclosure process requires the trustee (the person who holds the deed of trust and is attempting to seize the property) to follow certain steps.
Because it’s written into the contract already and was agreed to by the person who took the loan for the property, the non-judicial foreclosure process is relatively straightforward. This can seem like bad news for borrowers already overwhelmed with job loss, health issues, or other life stresses that contributed to falling behind on payments. Knowing the process, however, can help you see where and how you can stop foreclosure before it’s too late.
Here are the basic steps of a non-judicial foreclosure process:
Once the period of time required for default, as outlined in the mortgage paperwork, has passed, the lender can decide to go through with foreclosure. If they do so, they are required by law to send a written notice allowing you 20 days to “cure” (pay in full the amount owed), which means to bring the defaulted loan current. For certain loans, like FHA loans and VA loans, this time period is increased to 30 days.
The next step is the notice of sale, which is the second (and last) notice the law requires your lender to send to you. This notice of sale must give you at least 21 days’ written notice of the date of the foreclosure sale. Make sure you know whether the 21 days begins from the date the notice is mailed and not the date you receive it. If you are not home to receive this certified letter and do not go collect it from the post office, that will not stop the auction of your home. This foreclosure notice is also posted at the courthouse as well as filed with the county clerk.
In Texas, foreclosure auctions are held at the county courthouse on the first Tuesday of every month, even on holidays. Anyone may bid on these properties. Some people hope that they can buy the property back from the new owner after the auction, but in Texas you do not have a legal right to buy back your property from the new owner unless it was sold by the government, by a tax lender, or for non-payment of HOA fees. Even then, there are time limits to buy it back, and doing so can come with expensive fees.
Because of when the notices must be mailed to you by law, a foreclosure can go from the notice of default to the auction block in as little as 41 days. This makes the months between when you start missing payments and when the mortgage company decides to foreclose a crucial time in stopping the foreclosure from happening.
Loss mitigation is a term for all the ways mortgage servicers work with borrowers to avoid foreclosure from happening. Loss mitigation can start before you even miss a payment, or it can happen at virtually any point along the way through the foreclosure process. It’s important to know that the original notice of sale sent by the lender may also include what is known as a “notice to accelerate,” which can be scary to homeowners and make them think they no longer have options to avoid foreclosure.
An acceleration clause is the part of a mortgage contract that makes foreclosure a very real possibility versus a scare tactic. Acceleration means that defaulting on the loan by missing your payments will result in you owing the entire balance on the loan rather than just the amount of your missed payments. That means that missing a few thousand dollars in payments can leave you owing hundreds of thousands due to the mortgage company — and that is how foreclosure happens.
The intent to accelerate might be the moment where hopelessness really kicks in, but it does not mean there is no chance of saving your home (if that is what you want). Generally speaking, most lenders would still rather work with you than lose money on a foreclosure sale; even if they would not, they may not have a choice if you take other steps to delay or prevent the foreclosure.
Life changes, and sometimes there is very little you can do about it. At any moment, medical expenses, job losses, or unexpected expenses can flip your financial world upside down. Most mortgages are five months behind before they are ever referred to foreclosure and 10 months behind before the foreclosure sale, so you almost always will have time to find a solution.
The most obvious non-solution to stopping foreclosure on your home is continuing to avoid the mortgage company’s calls and hoping you can catch up in time. Unfortunately, this is what many people do. Acknowledging that you are in a financial hole is difficult, and you may not even be aware of the solutions that are out there to help you save your home.
In some cases, though, you might just want to be done with it. Maybe life changed drastically, and you cannot, or do not want to, continue fighting to make the mortgage payments. Chapter 7 bankruptcy will probably not provide a way for you to catch up with your mortgage, but it will put a stop to the foreclosure proceedings. That means more time for you to stay in your home while you make a plan for the next steps — all without the sting of a mortgage payment out of your reach. In the event that you are able to seek a Chapter 7 bankruptcy, you will also not be liable for Texas’ deficiency after the foreclosure sale, giving you a truly fresh start.
If you are worried that your finances need critical attention, consider speaking with an experienced debt management and bankruptcy attorney in Texas. A lawyer can help you consider the options for your unique circumstances and, if needed, can educate you about how bankruptcy — which is a federal process — might impact your Texas foreclosure proceedings.