The word foreclosure is a scary term for any property owner. It occurs when a borrower stops making payments on their mortgage or loan. Because the loan is secured with the property as the collateral for the amount borrowed, the bank can recover the debt by seizing the property and selling it.
Although there is no guaranteed method by which a lawyer can stop a foreclosure, a lawyer can examine documentation to assess whether there are any deficiencies to give you enough time to resolve any defaults. In addition, a lawyer can be your advocate with the lender to avoid having a foreclosure on your credit and record.
Foreclosure begins with a missed loan payment. After missing a payment for a couple of months, or one month depending on the lender, you may receive a letter or phone call from your lender. The most common foreclosure process in Texas is non-judicial foreclosure meaning that the lender can foreclose without going to court as long as the deed of trust contains a power of sale clause. A non-judicial foreclosure is a 3-step process.
(1) Notice of Default and Intent to Accelerate
Texas law requires a lender to send you a written Notice of Default and Intent to Accelerate by certified mail that gives you at least 20 days to cure the loan default. Depending on the lender, you may receive this Notice of Foreclosure after 120 days of delinquency. Some lenders can begin foreclosure at any time after the loan is in default.
In addition, your mortgage agreement (typically called a Deed of Trust) often includes an acceleration clause that gives your lender the ability to demand immediate payment of the entire balance due. This Notice of Default and Intent to Accelerate is sent to the borrower’s last known address and must include the amount due and the date it must be paid.
(2) Notice of Sale
If you do not pay the amount due within the given time frame in accordance with the Notice of Default and Intent to Accelerate, your lender will send you a written Notice of Sale by certified mail. Texas Law requires you to have at least 21 days’ notice in writing beginning the day the notice goes into the mail before the lender can sell the property. The lender must also post the Notice of Sale at the door of the county courthouse the property is located in and file it with the county clerk. The Notice of Sale is sent to the borrower’s last known address and must include the location, date and time of the planned sale.
(3) The Sale
Foreclosure sales are held at the courthouse of the county where the property is located on the first Tuesday of every month. The property goes to the highest bidder at auction. If the sale is for less than the amount owed to the lender, then the lender may sue you for the deficiency and get a judgment in the amount of the difference against you.
HOW A FORECLOSURE CAN IMPACT YOU
(1) Foreclosures damage your credit score with an estimated average drop of 280 points. Restoring that lowered credit score will take time of on-time payments.
(2) Foreclosure can cause tax implications. The IRS considers borrowed money that is not paid back as income and is therefore taxable. You could be required to pay taxes on any lender deficiency after the sale of the property.
(3) Foreclosure can make it difficult to purchase a new home as most lenders will require you to wait before they are willing to give you another mortgage.
(4) Foreclosure causes people to suffer from emotional distress from losing their home.
HOW CAN I HELP?
(1) Review documentation (note, deed of trust, loan agreement, any notices etc.) and ensure there is actually a default and that the lender is following necessary laws.
(2) Talk to your lender about a payment plan, temporary forbearance, or a loan modification.
(3) Review documentation and determine whether the loan agreement has a power of sale clause. If documentation shows the lender must go through the court for a judicial foreclosure, this may give you more time to repay the loan or find a way to pay it off. This is uncommon as most mortgage agreements include a Power of Sale.
(4) Help you sell your home. I can help you with necessary documentation to sell your home or recommend a realtor. Proceeds from the sale can be sent to your lender to pay off the existing lender.