Foreclosure in any aspect is a negative situation. No homeowner will ever want to foreclose their home because of any financial crisis. Facing foreclosure is an awful situation.
There are two ways through which the foreclosure takes place: Judicial and Non-Judicial. Texas allows a non-judicial foreclosure. The foreclosure process has to follow state law.
What Does Foreclosure Mean?
Taking a loan from a bank or a lender to buy a house or property is very common everywhere. Paying back the borrowed amount in the given time duration is also very important. If someone fails to pay back the loan amount, the foreclosure situation is very likely to come into existence. Foreclosure begins after the very first missed payment.
Foreclosure can also happen if the homeowner fails to pay the property tax levied upon them. There are various reasons for falling behind in payments like, financial crisis, medical emergencies, and sudden loss of job.
Introduction to Foreclosure in Texas
The foreclosure crisis peaked in 2010. Post this, the state and federal laws started heavily supporting the foreclosure process and mortgage services. If you fail to pay your mortgage payments in Texas, the lender will begin the foreclosure process. Foreclosures in Texas are governed by Chapter 51 of the Property Code as they are mostly non-judicial. The foreclosure procedure is held on the first Tuesday of every month.
Texas foreclosures most likely to give you the right to many benefits. They are:
- Receive notice in the form of a breach letter before foreclosure.
- You can apply for loan mitigation.
- If you are in the military, you will get special protection.
- Get notified about the foreclosure.
- Pay off your debt to prevent a foreclosure sale.
- You can redeem the property after the sale.
- Get any access money after a foreclosure sale.
Key Points About Texas Foreclosure
- Primary Security Instrument- Mortgage, Deed of Trust
- Judicial Foreclosure- Yes
- Non-Judicial Foreclosure- Yes
- Right of Redemption- No
- Timeline- Typically 60 Days
- Deficiency Judgements Allowed- Yes
Ways to Stop a Foreclosure in Texas
There are ways of stopping home foreclosures in Texas that you need to know. Let’s cover them all.
Declare Bankruptcy
Yes, bankruptcy is a way through which foreclosure can be stopped. But you need to understand the concept of chapter 7 and chapter 13 of bankruptcy.
Chapter 13 Bankruptcy in Texas: It is a common option to go for to stop foreclosure. According to chapter 13 bankruptcy, you are given a payment plan of 3 or 5 years to catch up with the payment in arrears. The lenders will be given orders to stop going forward with the foreclosure process. They will have to give you time to get back to your payment arrangements.
Chapter 7 bankruptcy in Texas: It is a liquidation form of bankruptcy. Unless you want the Texas bankruptcy trustee to sell your house, it may be a less common option to pursue. Even though it is the lower-cost bankruptcy option, you still may not want to opt this option.
You need to understand what your payment plan is. Is your payment plan regarding chapter 13 bankruptcy worth pursuing? For instance: you have $150,000 in arrears on your house and your payment plan is for 5 years / 60 months. Will you be able to pay an additional $2,500 every month to cover your arrears?
Applying for Loan Modification
It has become difficult to fully pay off the mortgage payments. There are many reasons why you can miss out on payments or get late in paying the mortgage. Before this unwanted thing happens, you may go to your lender and find out if they consider a loan modification option.
» Best Texas Mortgage Lenders: Read out the blog to know about the best mortgage lenders in Texas.
Reinstating Your Loan
Do you have enough cash to pay off all the loan amount? Approach your lender with cash. See if they accept the payment and permit you to continue paying your loan amount without any legal interference. Lenders only want to recover the loan amount and so they will accept your offer.
Plan for Repayment
Great! You can make payments again after missing out on some payments. Find out what your lender thinks regarding your repayment plan. In the repayment plan, you are allowed to pay the missed payments slowly along with the current mortgage payments. You can come up with an agreement on the repayment plan to stop foreclosure. According to this, you agree to pay your missed payments along with the normal payments.
Refinancing
Refinancing may be a difficult option to consider. Interest rates are going up only making it difficult to think of loans. You can start with a new lender which means a whole new agreement. There may be one drawback. It might become difficult to qualify for refinancing if your credit score is negatively affected.
Sell Out Your Home
It’s really sad even to think of selling your house. But it is actually a good option to consider selling your home in Texas to avoid foreclosure. You may receive an amount more than the actual price of your home. Perhaps you could even buy a house worth more than the one you sold. You can stop something drastic from happening and your credit report will also not get spoilt.
» Who Pays Closing Costs on a Home Sale in Texas: Read the blog to know who pays closing costs in Texas.
Short Sale
A short sale means that you can sell your home for an amount that is less than the amount you owe. The reason behind this is that sometimes your home is sold for a lesser amount in the auction. The bank/lender is sometimes not able to recover the whole amount they are hoping for.
Deed In Lieu of Foreclosure
A deed in lieu of foreclosure takes place when the homeowner transfers the property to the lender. The homeowner hand over the property to the lender, clearing all the debts they owe. For a homeowner, this is the best time to sell a house in Texas as it will be helpful to pull you out of the foreclosure. The property is then owned by the lender. You have to vacate the property as soon as possible. This way you can easily save yourself from any damage.
Frequently Asked Questions
How long does it take to foreclose on a house in Texas?
The Texas foreclosure process has roughly 160 days from start to finish until a home goes into auction, so knowing where you stand can help you decide what might be the next best course of action. Foreclosure is awful, to say the least.
What happens after a foreclosure in Texas?
After the sale, if the property sells for less than what is owed, the creditor may try to come after the borrower for the remainder of what is owed to them. This is referred to as a deficiency judgment. In nonjudicial foreclosures, a lawsuit must be filed in order to obtain a judgment to collect the deficiency.
How long do you have to foreclose on a lien in Texas?
two years
So, in most cases, you have up to two years to file a lawsuit to foreclose on a lien. If you fail to foreclose on the lien within these time parameters, your mechanics lien becomes invalid.
Is there a moratorium on foreclosures in Texas?
HUD also authorized the Federal Housing Administration to impose a 2-month moratorium on foreclosures and evictions for single-family homeowners with mortgages insured by FHA. Here are the key foreclosure protections in federal stimulus bill (the CARES Act) that passed by Congress on March 27th. See Section 4022.
Also Read
- How to Stop Foreclosure: Read the blog to know how you can stop foreclosure on your property.
- How to Avoid Foreclosure: Find out the ways by which you can avoid foreclosures so that you don’t have to face the foreclosure situation.
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- Selling a House by Owner in Texas: Go through the blog to know about selling a house by owner in Texas.
- How Much is the Closing Cost in Texas: Click to know how much are the closing costs in Texas.
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