There are 3 stages of the foreclosure process in Texas:
Default Period - This timeline is up to the lender and can run from 1 month to 9 months averaging about 5 months.
- Acceleration Period - The mortgage company calls your loan due in full payable in 30 days.
Foreclosure Period - Once the 30 day acceleration period has passed the mortgage company will immediately file for foreclosure. In another 21 days, the home will either be sold or taken over by the bank. If you do not leave, they will have you evicted in a matter of a few more days. Locks will be changed and your belongings will be set out on the curb in front of the home. Again, the "Don't Mess with Texas" slogan is taken very seriously around here.
Notice of Sale / Auction:
The lender posts a notice of sale at the door of the county courthouse and files a foreclosure notice with the country clerk 21 days prior to the foreclosure sale. The lender also mails a copy of the notice to the borrower at the last known address 21 days prior to the sale. Texas does not require the lender to publish notice of the sale in the local newspaper.
>>>>>>>>>>All foreclosure sales are between 10 a.m. and 4 p.m. on the first Tuesday of the month (regardless of holidays) usually on the county courthouse steps. The sale is conducted as a public auction with the property going to the highest bidder, who pays in cash, although the trustee may allow some time (within the same day) for the highest bidder to collect the full amount. The lender is also eligible to bid on the property.
>>>>>>>>>>The trustee transfers ownership to the highest bidder free and clear of any junior liens but subject to any senior liens. If the bid amount is higher than the amount owed to the lender, any surplus goes to junior lien holders. In Texas, the borrower's right of redemption after the sale does not exist.
There are many contributing factors to the current foreclosure crisis we are facing. Some are simply due to regular people getting in over their heads by taking on more debt than they should have. However, many factors are related to unfortunate circumstances that were simply out of the homeowners control. The ugly truth is that sometimes LIFE throws you a curve ball that you never anticipated and you are left in a difficult situation with no way out.
- Adjustable Rate Mortgages - Approximately 1.3 TRILLION dollars of Adjustable Rate Mortgages or ARM's are due for adjustment in the next 13 months. When this happens, the mortgage payment will increase substantially for the homeowner. Many of these people are already struggling under the current payment and will not possibly be able to pay the new one.
- Increased Property Taxes - In most cases, when a person purchases a newly built home from a builder, the property taxes collected in the escrow account are based on raw land only and do not include the value of the house. While this is typically disclosed by the lender, many of them intentionally gloss over this critical fact as if it were no big deal. They are usually working for the builder who has offered thousands of dollars to a buyer who is willing to use their "preferred lender". The builder and lender are not always concerned about the buyer's ability to meet future mortgage obligations after the home has been sold. In the year following the purchase, the taxes will adjust to reflect the house and the buyer's mortgage payment increases substantially to cover the difference.
- Declining Property Values - Our property values were sky rocketing up until a few years ago. Many people purchased homes that they actually cannot afford with the idea that it was a good investment which would increase in value offsetting the high mortgage obligation. While there may still be some hot spots that are appreciating nicely, most places are barely keeping up with the rate of inflation and many more are declining.
- Separation or Divorce - We have become a nation of 2 income families. When a separation occurs and there is only one income left to cover the mortgage, it is usually impossible to meet the obligation. The divorce statistics in our nation are staggering and have unfortunately become a major contributor to foreclosure.
- High Credit Card Debt - We live in a nation of consumption. Through media marketing, we are bombarded night and day with the concept that it is okay to play today and pay tomorrow. I am reminded of the old Popeye cartoons where Wimpy was always saying that he would "gladly pay you Tuesday for a hamburger today". While it seems so innocent at the time, borrowing money for the things we want today can come back to bite us tomorrow.
- Home Equity Loans - We live in a free country and I firmly believe that we should have the right to use our home as collateral if needed. However, here in Texas, the home equity laws only recently allowed for this and did so at a time when lenders were happy to quickly hand out as much cash as possible to anyone who asked with little restriction or common sense about the individual's ability to manage the increased mortgage payment tied to the loan. Millions of people have cashed out all of the equity in their homes in the last decade and no longer have the ability to access home equity in the event of a crisis today.
- While many of these people borrowed the money to cover a crisis in the first place, a new one occurred later and left them with no options. However, a great deal of the equity was taken to pay for kids to go to college, a remodel, credit card debt, new cars, expensive electronics and expensive vacations with the idea that an increase in salary at work and/or appreciating home values would make it possible to manage the new loan.
- Reduction in Pay or Loss of Job - Between the changing economy, outsourcing of jobs and other factors, many people have been forced to take a reduction in pay or have lost their jobs entirely. In Houston, we are still left with countless people who worked in telecommunications and IT who had become accustom to living on a 6 figure income that are now either unemployed or working in a different industry making a fraction of what they used to.
- Medical Hardships - Due to health issues, many people are forced to leave their paying jobs in order to fight for their life to overcome a disease or cancer. In some instances, the spouse is forced to leave their job as well in order to help provide for their loved one. In the worst cases, a mother and/or father are left with no choice but to take a leave of absence or quit their jobs entirely in order to care for a sick child. In addition to the obvious emotional crisis and loss of income, medical bills pile up quickly and often leave the family with no financial options.