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As the state which led the nation in residential foreclosures in 2006, lenders in the State of Texas have foreclosed on and reacquired over 27,000 single family homes annually since 2005. All foreclosures in the state must adhere to Texas foreclosure law to be deemed valid by the courts and the rules outlining the procedures for foreclosure comes from three sources; the promissory note, the mortgage agreement, and Texas foreclosure law. The rules detailed in all three sources must be complied with for the foreclosure to be considered properly conducted.
The promissory note is the borrowers pledge to repay the loan obtained by the lender according to the terms and conditions of the loan, while the mortgage agreement acknowledges that the property is collateral for the loan. If the borrower defaults on the terms of the loan, then the property can be sold by the lender to obtain the balance of the loan owed to the lender. Texas foreclosure law was rewritten and strengthened after the collapse of the real estate market in the 1980s. That was the last time that Texas foreclosure law was modified.
What Is The Procedure For Foreclosure?
There are several ways that a borrower may default on the mortgage agreement and cause the initiation of the foreclosure process under Texas foreclosure law. The most common way is for the borrower to miss making the scheduled payments on the loan as detailed in the promissory note. Other ways that borrowers may default on the agreement include a failure to pay the property taxes on the property or failure to insure the property according to the mortgage agreement. When a default occurs, the lender has the right to make the entire balance of the loan, not just the default amount, due immediately under a clause known as the acceleration clause. The borrower has 20 days after receipt of a notice that the loan is in default to pay the amount owed before the acceleration clause can be enacted. If the default amount is not paid within the required timeframe, then Texas foreclosure law allows the foreclosure to go forward.
Under Texas foreclosure law, if the borrower is unable to pay off the entire amount of the loan as required under the acceleration clause, then the lender has the right to sell the property at a foreclosure sale to obtain the amount owed on the loan. A notice is sent to the borrower and filed in court listing the date and time that the property will be listed for sale at public auction. Generally, the auction will be held at or near the courthouse where the notice was filed. The property will be sold at the auction to the highest bidder and the proceeds from the sale will be divided according to the rules detailed in Texas foreclosure law. If the proceeds from the sale of the property are not enough to cover all of the expenses associated with the foreclosure along with the balance owed to the lender, the borrower may be responsible for making up the difference in amounts.
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