- In Texas, there are two types of home mortgage foreclosure. The first type is judicial foreclosure, which is often referred to as in-court foreclosure. With this type, the lender must file a lawsuit in court to foreclose on the borrower's home. The court then grants the foreclosure, and the property is sold at an auction. With non-judicial foreclosure, also called out-of-court foreclosure, a power of sale clause is included in the mortgage, allowing the lender to sell the property to pay off the defaulted loan, without going to court first.
- Generally, foreclosure proceedings do not begin as soon as a homeowner misses a mortgage payment. According to Foreclosure Law, Texas lenders often wait about 60 days after a missed mortgage payment to start the process. During that time, Texas lenders usually send borrowers notices requesting payment.
- When a power of sale clause is included in a mortgage, a lender may not simply sell off a home without any notice. In Texas, the lender must first send the borrower a letter of demand. This letter lets the borrower know that she must pay overdue mortgage payments within 20 days or face foreclosure proceedings. After the 20 days' notice has expired, a foreclosure notice is filed with the clerk at the county courthouse, and a copy is mailed to the borrower. In Texas, a lender must also post this notice on the door of the county courthouse.
- A judicial foreclosure proceeds much like a power of sale foreclosure, except that the lender must first get a court order to proceed. The lender files a lawsuit with the county court and gives the homeowner notice of the lawsuit. The borrower then has the chance to defend against the foreclosure in court.
- Whether a Texas foreclosure is judicial or non-judicial, the auction process is the same. Homes are auctioned off in a foreclosure sale, which is held on the first Tuesday of the month on the steps of the courthouse. Foreclosure auctions are public, with homes going to the highest bidders.
- Sometimes lenders are willing to make payment arrangements with borrowers to avoid going through foreclosure proceedings. Once foreclosure proceedings have begun, it is still possible to put a stop to them if the borrower is able to pay off his back balances and fees or negotiate a satisfying payment arrangement. Sometimes homeowners refinance their original mortgage loans to avoid foreclosure and secure more affordable payments.
