Judicial/ Non-Judicial Foreclosure: Judicial & Non-Judicial Foreclosure
Right of Redemption / Deficiency Judgment: No / Yes
Timeline: 60 Days, Can Vary depending on individual cases
Deed of Trust / Mortgage as Security Instruments: Deed of Trust, Mortgage
Judicial Foreclosure process:
If the power of sale clause is not present in the Deed of Trust or Mortgage documents, a Judicial foreclosure process is used. In this process, the lender files a lawsuit against the borrower in case the latter happens to default on their mortgage payments. The court generally verifies the same and issues an order authorizing the foreclosure sale during which the property is sold off to the highest bidder through a public auction.
Non-Judicial Foreclosure process:
If a power of sale clause is present in the Deed of Trust or Mortgage documents, a Non-Judicial foreclosure process can be followed. The power of sale clause authorizes the lender or their authorized representative (known as the Trustee) to conduct the foreclosure proceedings in case the borrower happens to default on their mortgage payments. The following guidelines can be followed for the same.
In case if the power of sale clause mentions the time, location and other foreclosure terms to be followed, the same needs to be followed as such. Otherwise, the following procedure is followed.
In Texas, upon default by the borrower, the lender needs to send a notice of demand informing the buyer that they have up to twenty days to pay up all their dues before the foreclosure process commences.
After this twenty day notice period expires, a foreclosure notice should be prepared and recorded with the county clerk, at least twenty one days before the actual foreclosure sale date.
This notice is also pasted on the front door of the courthouse belonging to the same county as the property and it needs to be sent to the borrower (by registered post) at their last known address.
The foreclosure sale is usually conducted on the first Tuesday of any month after all the notices, as mentioned above, have been given. The foreclosure sale may be conducted on the first Tuesday even if it is a public holiday.
During the sale, any member of the public may bid. In Texas, even the lender may bid for the property, if they wish to. The property is sold off to the highest bidder in cash, through a public auction.
Lenders can file a deficiency judgment against the borrower, if the value offered by the highest bidder is lower than the total amount due by the bidder. But the amount for which they can sue the borrower is restricted to the difference between the fair market value of the property and the amount owed to them.