Understanding the Foreclosure Time Line in Texas

As a real estate lawyer, one frequesntly-asked question I receive from both lenders and homeowners is "How Fast Can a Residential Property Be Foreclosed?"

The answer to this question is generally set out in 2 sources: (i) the documents a borrower signs at closing, including the "promissory note" and "deed of trust;" and (ii) Chapter 51 of the Texas Property Code.

Though often ignored or rushed-through in the excitement of buying a new home, the documents signed at closing are legal instrucments with very serious implications. These documents evidence the buyer's personal promise to pay the mortgage lender, and serve as a legal grant to the lender (called the "mortgagee") of a security/collateral interest in the property being purchased. They also empower the lender to sell the collateral throgh a foreclosure sale when a default occurs. This power is the basis for foreclosure sales following a homeowner's default in his promise to pay the mortgage lender.

Chapter 51 of the Texas Property Code, and Section 51.002 in particular, is the State's way of regulating how the process authorized by the clsoing documents occurs.

Section 51.002(a) provides that a sale of real property pursuant to a deed of trust or other contract lien must be a public sale at auction held between 10 a.m. and 4 p.m. of the first Tuesday of a month. The sale must take place at the county courthouse in the county in which the land is located at a designated area at the courthouse.

In practical terms, Section 51.002(a) means that there is only ONE DAY EACH MONTH upon which foreclosure sales, as known as "Trustee's Sales" take place. The remaining deadlines prescribed by Chapter 51 are triggered by the sale date.

For 2011, Trustee's Sale / Foreclosure Sale Dates are as follows:

January 4, 2011
February 1, 2011
March 1, 2011
April 5, 2011
May 3, 2011
June 7, 2011
July 5, 2011
August 2, 2011
September 6, 2011
October 4, 2011
November 1, 2011; and
December 6, 2011.

Section 51.002(b)requires the foreclosing lender to provide at least 21 days written "Notice of Sale" by: (1) posting notice at the courthouse door of each county in which the property is located; (2) filing a copy of the notice with the county clerk; and (3) serving written notice of the sale by certified mail on each debtor who is obligated to pay the debt. NOTE: Service by of certified mail is complete when the notice is deposited in the United States mail, postage prepaid and addressed to the debtor at the debtor's last known address. Failure or refusal of the borrower to accept the letter has no bearing on the timeline.

However, Section 51.002(b) is not the beginning of the notice period. Instead, Section 51.002(d) requires a mortgage lender or its servicer to FIRST serve a debtor in default under a deed of trust with written notice by certified mail stating that the debtor is in default under the deed of trust and giving the debtor at least 20 days to cure the default. This notice, often referred to as a "notice of Default and Acceleration" must be given at least 20 days before the "Notice of Sale" is given under Subsection (b). This notice must be sent by certified mail, return receipt requested, and the right to receive such notice cannot be waived.

Thus, the timeline may be calculated as follows:

1.date that a debtor in default is sent a Notice to Cure/Notice of Acceleration under Setion 51.002(d).

ADD MINIMUM 20 DAYS.

2. lender to send "Notice of Sale" under Section 51.002(b).

ADD MINIMUM 21 DAYS

3. Trustee's Sale/Foreclosure Sale to take place (MUST BE FIRST TUESDAY OF A CALENDAR MONTH).

It is important to realize that the trustee must strictly comply with Chapter 51 and any other requirements set forth both in the deed of trust and the promissory note to ensure a valid foreclosure.

If insufficient notice of either the Acceleration or the Sale is provided, the sale may be halted by issuance of a Temporary Restraining Order. Also, if the sale does not occur on the date for which notice is provided, the entire process of sending, posting and filing notices must be repeated.

Given the fact that there is only one FORECLOSURE DAY each month, this can significantly delay the sale of the property.