Sometimes bad things happen to good people. There are many reasons a homeowner might be facing foreclosure on their home. These can include but are not limited to:
- Job loss or unexpected unemployment
- Sudden illness or medical emergency
- Death in the family
- Divorce or loss of second income
- Excessive debt obligations
- Job demotion or promotion denials
- Inability to pay an adjustable interest rate that increases
- Unexpected major home maintenance expense
How can we help stop foreclosure on your Katy or Houston, Texas area home?
We buy homes in pre-foreclosure – in any price range and in any condition. This means we can make you a cash offer, close within ten days – sometimes sooner – and help you avoid having your home foreclosed on and having a foreclosure on your credit record.
You’ll find a list of the frequently asked questions we receive from homeowners in general here. You’ll find a list of foreclosure specific frequently asked questions below.
Disclaimer – The information on this page is intended for general informational purposes only and not to provide legal advice.
What is foreclosure and what does it mean?
Foreclosure is a legal process through which a mortgage company or bank takes back a home to satisfy a mortgage loan that is in default. When you fail to make your mortgage payments, this can result in foreclosure.
Although your loan is considered delinquent on the first day of a missed payment, under federal law, your lender must wait until you are more than 120 days delinquent on payments before making the first official notice or filing for foreclosure.
If nothing is done to stop this process, your home will be reclaimed by the lender and sold to recoup your unpaid debt.
How do foreclosures work?
Once your loan is considered in default, the following process is triggered:
- Notice of Default and Intent to Accelerate: Texas law requires your lender to send you a foreclosure notice known as a notice of default and intent to accelerate, and to provide at least a 20 day grace period for you to make your late payments. This letter will include the amount due and the date it must be paid to prevent foreclosure. During this period your home is considered to be in pre-foreclosure since you still have an opportunity to stop the foreclosure process by becoming current on your loan, selling your home, or working out a solution with your lender.
- Notice of Sale: If you fail to pay your debt within the grace period allowed, your lender will send a notice of sale. This notice will arrive at least 21 days before the foreclosure sale is scheduled. The notice will also be posted on the door of your county courthouse and filed with the county clerk. It will include the date, time, and location of the sale.
- The Foreclosure Sale: Foreclosure sales are held the first Tuesday of each month between 10:00 a.m. and 4:00 p.m. at the county courthouse. At the sale, your property will be sold to the highest bidder. Your lender may also bid for the home. If they are the highest bidder ownership will revert to the bank, and the home will be considered Real Estate Owned (REO).
- Deficiency Judgement: In some cases, you may still owe your lender money after the foreclosure. This happens when your home sells for less than the amount owed on your loan. In this case, your lender may file a lawsuit to recover the difference. In Texas, the bank has two years to sue the nonjudicially-foreclosed owner for the deficiency in a separate lawsuit. If the bank forgoes or loses the suit, it will not be entitled to collect the remaining balance.
While many states allow more leeway and more extended grace periods to satisfy your debt, the foreclosure process in Texas moves very quickly. The final sale of your property generally occurs within about six weeks of your notice of default.
What types of foreclosures are there in Texas?
In Texas, there are two different types of foreclosure procedures available depending on the particulars of your mortgage agreement: Nonjudicial and Judicial foreclosures.
What is a Nonjudicial foreclosure and how does it work?
The majority of foreclosures in Texas are nonjudicial or power-of-sale foreclosures. This means your lender does not need to go through the court system to complete the foreclosure. This process is made possible by a power of sale clause included in the deed of trust or mortgage agreement you signed at the time of purchase.
This clause pre-authorizes the sale of your property by way of a nonjudicial foreclosure to pay off the balance of the loan in the event of a default. You are permitted to file a lawsuit on your own to seek judicial review of the case but are responsible for all legal fees incurred.
What is a Judicial foreclosure and how does it work?
Judicial foreclosure requires the lender to go through the state court system and receive approval from a judge before foreclosing on your property. This type of foreclosure is permitted in all 50 states but is not required in Texas. The process begins much like a nonjudicial foreclosure, with your lender sending a letter of intent to foreclose.
At this point, however, the lender files a lawsuit with the court asking for the right to sell the home and apply the proceeds from the sale to the debt. The lender may also request a deficiency judgment at this stage. You are then served with a summons, notifying you of the lawsuit against you.
You are given the opportunity to respond to the complaint and make your case before the court. You may also use this time to make late payments to satisfy the debt. If the court decides in favor of the lender, foreclosure proceedings continue with the sale of your home.
How long does foreclosure take?
Because the majority of foreclosure cases in Texas are nonjudicial, the timeline for foreclosure is generally no more than 60 days from the time you receive a notice of default. This time can vary widely for judicial foreclosures, as the timeline is dependent on the length of each court case.
How do you prevent a foreclosure?
Once the foreclosure process begins, it can be difficult to stop. In Texas, a foreclosure can run its course very quickly once it is set into motion. For this reason, the best way to avoid foreclosure is to prevent the filing of a notice of default. The most effective wait to prevent foreclosure from starting is to make any outstanding payments.
If, however, you know you are unlikely to meet your mortgage obligations the first thing you should do is call your lender and be honest. Most lenders will also prefer to avoid foreclosure if possible, and may offer several options to help you keep your home:
- Forbearance: In a mortgage forbearance agreement, your lender agrees to refrain from exercising their legal right to foreclose if you agree to a mortgage plan that will bring your payments current over a specified period. You must resume the full payment at the end of the period, plus any additional amount needed to become current. This is a short-term solution best suited for those with temporary financial issues caused by unexpected problems such as unemployment or medical problems.
- Repayment plan: Another option for those facing temporary financial trouble is to design a repayment plan. This generally involves adding a small additional amount to each monthly payment until you have repaid your debt.
- Loan modification: Unlike a forbearance agreement, a loan modification agreement is a long-term solution that adjusts the terms of your original loan. Loan modifications will usually involve a reduction in the interest rate on the loan, an extension of the length of the maturity of the loan, a different type of loan, or any combination of the three. All of these measures act to reduce your monthly payments.
- Refinance: If you had sufficient equity in your home, your lender might be willing to add the missed payments to your current loan balance and recalculate the monthly payments on the loan.
- Payment forgiveness: In very rare cases, your lender may simply give you a break by forgiving one or two missed payments outright.
How do you stop a foreclosure?
Once the foreclosure process begins, you have a limited amount of time to stop it. The following steps may be able to stop the process before your home is sold:
- Speak to your mortgage company: If you have not yet contacted your lender, this is the time to do so. Even after the notice of default has been sent, your lender may still be willing to come to an agreement to avoid foreclosure using one of the options listed above.
- Sell your home: If you are unable to reach a suitable agreement with your lender, you may be able to sell your home before the auction. Your lender must consider offers on your home up until the time of auction. If your home is worth less than the amount you owe, you might be a candidate for a short sale. A short sale affects credit but not as severely as a foreclosure. You or your agent will need to negotiate with your lender to find out if the lender will cooperate on a short sale.
- Sign a deed-in-lieu of foreclosure: Rather than going through the foreclosure process, you may give your lender a properly prepared and notarized deed to your home. This transfers ownership of the home to your lender who then forgives the mortgage debt and cancels the foreclosure action. Depending on the circumstances, a deed-in-lieu can affect your credit score just as much as a foreclosure and is generally more beneficial to the lender than to you. The only true benefit to you is that process is faster and, unlike foreclosure, the action is not made public.
- File for bankruptcy: Filing for Chapter 13 bankruptcy can be an effective way to keep your home in the face of foreclosure. After filing, the court will issue an automatic stay on all debt collection actions against you, including foreclosure proceedings. Chapter 13 provides you with a 5-year catch-up plan to become current on your mortgage. As long as you continue to make these payments through the Chapter 13 Trustee, you can prevent foreclosure. While Chapter 7 bankruptcy will also temporarily stop the foreclosure process, you will ultimately have to become current on your mortgage to keep your home. With both bankruptcy options, the possibility of foreclosure remains if you are not able to make the agreed-upon payments.
What does pre-foreclosure mean?
Your home is considered to be in pre-foreclosure in Texas during the 20-day grace period after your lender issues the foreclosure notice – known as a notice of default and intent to accelerate. During the pre-foreclosure period, you still have an opportunity to stop the foreclosure process by becoming current on your loan, selling your home, or working out a solution with your lender.
How do foreclosure auctions work?
In Texas, foreclosure auctions, also known as trustee sales, are held on the first Tuesday of each month between 10:00 a.m. and 4:00 p.m. at the county courthouse.
At auction, your lender will set the opening bid. This bid is generally equal to the outstanding loan balance, interest accrued, and any additional fees associated with the trustee sale.
If there are no bids higher than the opening bid, the property will be purchased by the lender, rendering it REO or Real Estate Owned. This is not uncommon since many properties up for foreclosure auctions are worth less than the total amount owed to the lender.
What does foreclosure redemption mean?
One less common way to avoid a foreclosure is by redeeming the property before the foreclosure sale.
To redeem the home, you generally must pay off the entire underlying mortgage debt, plus interest and other costs incurred during the foreclosure. To do so, you must request a payoff quote from your lender. In Texas, you may redeem your property at any time between receipt of the notice of default and the foreclosure sale.
While some states offer homeowners the right of redemption for a certain period following their home’s sale at auction, Texas does not. Once your home is sold, there are no remaining legal avenues to redeem it.
If you can redeem your home during the foreclosure process, you will see the term “foreclosure redeemed” on your credit report. This is uncommon, though, since those facing foreclosures are generally unable to make this kind of payment.
Is the foreclosure process different if I have a guaranteed loan and/or mortgage insurance?
Some homeowners have a mortgage that is guaranteed by the federal government through programs like Veteran’s Affairs (VA), The U.S. Department of Agriculture (USDA), and the Federal Housing Administration (FHA). The additional backing by these government programs helps borrowers who might not qualify for a conventional mortgage obtain a home.
While these services assist in obtaining a mortgage, in general, they do not provide any protection from foreclosure once a mortgage is in default. You can learn more about how foreclosure works with guaranteed loans here.
Are there any differences between tax foreclosures vs. standard foreclosures?
A tax foreclosure is one in which a home is foreclosed on to collect an outstanding tax liability rather than cover the cost of a mortgage in default. When you fail to pay your real property taxes in Texas, the overdue amount becomes a lien on your home.
As soon as your property tax becomes delinquent, the taxing authority is entitled to begin a foreclosure in court to recoup the debt. If you fail to pay the overdue amounts, the court will enter a judgment, and your home will be sold. If the home does not sell at the tax sale, the county will take possession and attempt to sell.
In Texas, you are entitled to redeem your home both before and after a tax foreclosure is complete. To redeem the home before foreclosure, you must pay the amount in the judgment, which will include taxes, interest, penalties, and any additional costs incurred.
Unlike mortgage foreclosure, Texas also offers you the right of redemption following a foreclosure. The redemption period is two years from residential homestead properties and agricultural properties, and six months for all other properties.
This type of redemption is much more costly, however, since you will need to reimburse the new buyer the full cost they paid at auction, all other associated taxes and fees, and a 25-50% redemption premium depending on when you redeem.
Can a homesteaded home be foreclosed on in Texas?
Yes. While Texas has a very generous homestead exemption, these laws do not protect homeowners from foreclosure.
Under Texas homestead laws, exemptions are available that reduce annual property taxes on your homestead and protections are provided from the forced sale of your home to satisfy creditors such as payday lenders or debt collections. Other debts, however, are not included in these protections. These include:
- Unpaid property taxes
- Missed mortgage payments
- Defaulted second liens for home equity loans or home equity lines of credit
- Unpaid federal income taxes
- Unpaid past-due child support
- Unpaid government-backed student loans
The homestead exemption can offer protections to your home should you choose to file for bankruptcy as a means of avoiding foreclosure.
Are there government programs that can help me avoid foreclosure?
There are some programs to assist homeowners who are at risk of foreclosure and otherwise struggling with their monthly mortgage payments. The majority of these programs are administered through the U.S. Treasury Department and HUD. These programs include:
- Home Affordable Refinance Program: This program can help you refinance your home even if it has lost significant value and the mortgage balance owed is more than 100% of the home value.
- Home Affordable Unemployment Program: This program reduces or suspends mortgage payments for 12 months or more for homeowners who are unemployed. If you qualify, your mortgage payments may be reduced to 31% of your income or fully suspended.
- Principal Reduction Alternative: This program encourages your mortgage lender to reduce the amount of principal you owe. Currently, there are over 100 loan servicers participating in this program.
- Home Affordable Modification Program: This program has helped many homeowners lower their payments and save their homes from foreclosure. The Federal Housing Administration has a HAMP program targeted specifically for the loans they insure.
- The Home Affordable Foreclosure Alternatives Program: This program helps those who are not able to secure a permanent loan modification or cannot avoid foreclosure. HAFA provides protection and money to eligible borrowers who decide to do a short sale or a deed-in-lieu of foreclosure.
- Second Lien Modification Program: This program helps homeowners with a second mortgage on their home. This applies to properties where the first mortgage was modified under the Home Affordable Modification Program.
- Making Home Affordable: This is an official program of the departments of the Treasury and Housing and Urban Development, which provides a broad range of foreclosure prevention solutions, including lower monthly mortgage payments for struggling homeowners, as well as options for unemployed or underemployed homeowners and those who owe more than their homes are worth.
In addition to these federal programs, the Texas Health and Human Services Commission can help set you up with a foreclosure prevention counselor. Counseling and other services that are provided will include a financial analysis of your specific situation, research to determine the current value of your home, mediation and loan workout solutions, and a review of all other available options, such as refinancing or restructuring of the mortgage.
What happens after foreclosure?
If you are unable to stop the foreclosure process, your home will be sold to the highest bidder and ownership immediately transferred to the new owner. At that point, you automatically become a tenant in the property you previously owned and are subject to the wishes of the owner. This applies even if your home goes back to your lender.
In some situations, you may be able to negotiate something with the new owner to continue to occupy the property. However, the new owner may choose to evict you from the home immediately.
The first step toward eviction is to send you a written notice stating that you must move out. The Texas county constable’s office where the home is located serves eviction notices with a court date for an eviction hearing. After the ruling, you will have five days to vacate the property or appeal. After five days, the constable will post a notice on the front door giving you 24 hours to vacate. If you fail to do so, you and your belonging can be physically removed from the property.
What are the effects on my credit and being able to obtain a new mortgage after foreclosure?
According to FICO, the higher your credit score is at the time of foreclosure the more it will drop as a result. If your credit score is 680, a foreclosure will drop your score on average by 85 to 105 points. If your credit score is excellent at 780, a foreclosure will lower your score by 140 to 160 points.
A foreclosure will remain on your credit record for an average of seven years. Your credit score will gradually improve over these seven years, but not fully recover until the foreclosure is dropped from your record.
The waiting period to apply for another mortgage loan varies based on your situation and the type of loan you are seeking. In general, you will need to wait seven years after a foreclosure or short sale to get a conventional mortgage, three years to get an FHA or USDA loan, and two years to get a loan backed by the VA. You may be able to shorten this waiting period by making a large down payment or paying a higher interest rate.
How can we help prevent foreclosure on your Houston, Texas area home?
We buy homes in pre-foreclosure – in any price range and any condition. This means we can make you a cash offer, close within ten days – sometimes sooner – and help you avoid having your home foreclosed on and having a foreclosure on your credit record. You can request a free, no-obligation, cash offer for your home here.