Texas Foreclosure Process - Greater Houston Houses - Download

1. Foreward Firstly, whatever successes my family and I have had in this world is only through Jesus Christ our Lord and Savior that strengthen us. Seek God in all ye do and he will show you the path to take. (Proverbs 3:6) "Gaining knowledge is the first step to Wisdom. Sharing it is the first step to Humanity." This book is dedicated to my loving wife Anera, son Jude and daughter Nicole. Disclaimer: Greater Houston Houses LLC is not a registered investment, legal, or tax advisor or real estate broker/agent. All opinions expressed by Greater Houston Houses LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date occasionally unintended errors and misprints may occur. 18062 FM 529 Ste. 144, Cypress Tx 77433 Tel: 832-510-6471 Fax: 832-263-8486 Website: www.greaterhoustonhouse.com

2. Texas Foreclosure Process Explained For those – like me - who would rather go straight to the point, I will be giving a summary of the Texas foreclosure process in Chapter 51 of the Texas property code which will include the main points that could be of relevance to us. I have also organized a short glossary at the end of this to enable the non-lawyers reading this to understand some of the legal jargon I will make use of. Usually, a foreclosure in Texas could be in merely 41 days, whereas in judicial states such as Kansas, a foreclosure could take years. Recently, changes in the CFPB have been made and it is stated that a lender must be defaulting for a minimum of 120 days (this might be extended to 180 days) before the acceleration of the note. Appointment of Substitute Trustee Don’t let the topic sway you, the explanation is straightforward as well as its importance to you. This is practically the same throughout the states for non-judicial foreclosure. Typically, when a property is purchased with financing three documents are to be signed at closing. • The deed that assigns ownership of the property • The promissory note that enumerates the terms of payment to the lender • The deed of trust which states the terms of default and foreclosure The deed of trust serves as a security instrument for the lender, it appoints a trustee in the document to be the accountable party responsible for the foreclosure in the case of default. 10 18062 FM 529 Ste. 144, Cypress Tx 77433 Tel: 832-510-6471 Fax: 832-263-8486 Website: www.greaterhoustonhouse.com For with God nothing shall be impossible. Luke 1:37 (NKJV)

3. More often than not, the trustee initially appointed at purchase won’t be the foreclosing attorney selected on default by the lender. This situation calls for a ‘substitute’ trustee selected by the bank to take place of the original. Although not often, this is usually the first sign of a pending foreclosure. It can sometimes be filed several weeks prior to the notice of default. Notice of intent to accelerate (and right to Cure) This is either sent by the lender or the trustee. In any case, with the residential mortgages in Texas, it is mandatory that the mortgagor is given a minimum of 20 days to catch up on the delayed payments. This will include several sensitive information and should be mailed to the mortgagor’s last known address. This notice is very important to you, it will tell you who is on the loan, the reason for acceleration, and can help you assess the payoff quickly. That’s why it is highly recommended that you request to see it when meeting with a seller. A lender would accelerate without delayed payment for several reasons including; default taxes, default insurance, or transfer of title. A list of appropriate reasons will be included in the deed of trust signed by the borrower at closing. Notice of default This is where it gets serious. It is general knowledge that an auction for houses or properties on foreclosure is always held on the first Tuesday of every month. Regardless of a holiday or unfavorable weather. 11 18062 FM 529 Ste. 144, Cypress Tx 77433 Tel: 832-510-6471 Fax: 832-263-8486 Website: www.greaterhoustonhouse.com For with God nothing shall be impossible. Luke 1:37 (NKJV)

4. This gist of this notice is to inform you of the impending foreclosure which usually happens in about 21 days. It will also state that the property will be sold at the next auction (which will be on a Tuesday). The borrower will be informed of this development and the notice will be posted at the court and a public record. The hard pill to swallow here is that if the property is not sold and default payments are not cleared before the following Tuesday, the trustee will have to sell the property to the highest bidder at the auction. So this could create a motivated list of sellers. It is important to note that your speed matters when things get competitive and in this case you have to act as fast as possible. I would recommend that you cop this notice from the county clerk’s office as soon as they are put up and mail them to the property owners immediately. The property could already be sold if you wait a few days. First Tuesdays – The Texas Foreclosure As earlier mentioned, holidays or unfavorable weather does not stop or affect the foreclosure auction on the first Tuesdays of every month. The time and place for the auction will be stated in the notice of default and the highest bidder will get the property with the title transferred at sale through a trustee deed. However, if no bids are placed, the property will become an REO property after being purchased by the trustee in favor of the lender. The lender may move on to sue the borrower - if the sales price at the auction is not sufficient to clear the penalties and loan amount - and receive a “Deficiency Judgement”. If the lender does not sue, the borrower could still be tracked by the IRS for the deficiency employing a phantom income that will be taxed. 12 18062 FM 529 Ste. 144, Cypress Tx 77433 Tel: 832-510-6471 Fax: 832-263-8486 Website: www.greaterhoustonhouse.com For with God nothing shall be impossible. Luke 1:37 (NKJV)

5. Next steps for the borrower? As earlier mentioned, holidays or unfavorable weather does not stop or affect the foreclosure auction on the first Tuesdays of every month. The time and place for the auction will be stated in the notice of default and the highest bidder will get the property with the title transferred at sale through a trustee deed. However, if no bids are placed, the property will become an REO property after being purchased by the trustee in favor of the lender. The lender may move on to sue the borrower - if the sales price at the auction is not sufficient to clear the penalties and loan amount - and receive a “Deficiency Judgement”. If the lender does not sue, the borrower could still be tracked by the IRS for the deficiency employing a phantom income that will be taxed. Glossary • Acceleration Clause – A clause included in most deeds of trust that enables the mortgagee to proclaim the full amount of the note due and payable. • The lenders will demand a complete refund if the borrower breaks a rule. Collateral – Property sworn to the lender in the deed of trust as security for the refund of the loan. • The collateral will be claimed if the rules are broken. Deed of Trust – Mortgage tool that - in the event of default - produces a claim on the collateral and enables the trustee to sell it to clear the loan debt. • This is the lien the lender places on your property, and it enumerates the rules you have to follow if you want to avoid a foreclosure. Mortgagee – Lender or holder of the security interest in the property; the lienholder; the mortgage servicer under specific circumstances. 13 18062 FM 529 Ste. 144, Cypress Tx 77433 Tel: 832-510-6471 Fax: 832-263-8486 Website: www.greaterhoustonhouse.com For with God nothing shall be impossible. Luke 1:37 (NKJV)

6. • This is who the borrower gets money from. Mortgagor – Debtor, borrower, and grantor of the security interest in the collateral. • This is the original owner of the property. Mortgage Servicer – Last person to whom the mortgagor has been directed by the present mortgagee to send payments for the debt. • This is who the original owner pays to. Non-Judicial Foreclosure – Foreclosure procedure that requires no judicial intervention and is done in the absence of court engagement. • A straightforward process that does not involve the court or judge. Security Instrument – Deed of trust or mortgage; the document that creates the lender’s lien on the collateral and gives the trustee the power of sale. • See deed of trust Substitute Trustee – Individual selected by the present mortgagee or mortgage servicer to implement the power of sale in place of the original trustee assigned in the deed of trust. • This is the individual who sells the property at the auction. Trustee – Individual(s) permitted to implement the power of sale under the terms of the deed of trust. • This is the person that takes action when the borrower refuses to pay the lender. 14 18062 FM 529 Ste. 144, Cypress Tx 77433 Tel: 832-510-6471 Fax: 832-263-8486 Website: www.greaterhoustonhouse.com For with God nothing shall be impossible. Luke 1:37 (NKJV)

7. 18062 FM 529 Ste. 144, Cypress Tx 77433 832-510-6471 832-263-8486 vaughn@greaterhoustonhouse.com www.greaterhoustonhouse.com 36 18062 FM 529 Ste. 144, Cypress Tx 77433 Tel: 832-510-6471 Fax: 832-263-8486 Website: www.greaterhoustonhouse.com For with God nothing shall be impossible. Luke 1:37 (NKJV)