Foreclosure is a legal procedure in which property securing a defaulted loan is sold by the lender. This is done to pay the back payments owed and the remaining balance of the borrower's loan. The amount paid by a new buyer at the foreclosure may not cover the full outstanding loan amount, which means the borrower may continue to owe the lender the difference. This is called a deficiency judgement.
When it comes to foreclosures, there are primarily two types: judicial and non-judicial. The difference is that the judicial foreclosure requires a lawsuit to be filed in court. A non-judicial foreclosure bypasses the process of court. Most states allow both procedures. The primary method in Texas is non-judicial.
Here is a basic outline for Non-Judicial Government Foreclosure:
A. The note, deed of trust and information on the default are forwarded to the trustee.
B. The notice of default and other necessary documents are prepared.C. The notice of default is then recorded and the foreclosure time line begins.
The Default Period
A. A trustee sale guaranty (TSG) is ordered from a title company.
B. The required legal mailings are sent to the borrower and the junior lien holders.
C. If the loan has not been reinstated or paid off within the default period, the lender then authorizes the nextstep in the foreclosure proceedings.
Publication Period and Trustee's Sale
A. The trustee will prepare, record and arrange to post the notice of trustee's sale.
B. The notice of trustee's sale must be published once a week for three consecutive weeks in a newspaper of
general circulation near the property location.
C. The borrower or junior lien holder may reinstate the loan at any time up to five business days before the
D. If the loan has not been reinstated, prior to five business days before the sale, the beneficiary may demand
that the entire unpaid obligation be paid in full during that five-day period.
Please note that states may vary in their legal definitions, time frames, notice periods, requirements, and
processes of foreclosure.
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