Lenders may obtain deficiency judgments, but they are limited to the difference between the fair market value of the property at the time of sale and the balance of the loan in default.
Please note: If a borrower’s property is not their homestead, the lender can ultimately give a notice of trustee/foreclosure sale combining both the acceleration and the foreclosure period into one notice.
Unlike some states, in Texas there is no “redemption period” for residential properties after foreclosure; in other words, the homeowner loses all rights to the property under the Deed of Trust and mortgage agreement signed previously, and has no recourse or way to get the property back once the property has gone to foreclosure.
How Many Payments Can I Miss Before the Bank Will Foreclose on Me?
This is lender specific, meaning it varies from lender to lender. For Texas homesteads, some lenders will wait until three or more payments have been missed before initiating foreclosure. But they are not OBLIGATED to wait beyond the 20-day notification (mentioned above) to foreclose. This is why time is of the essence when a homeowner is facing foreclosure.
What is a Short Sale?
A Short Sale is an excellent option for some homeowners who are facing foreclosure.
A Short Sale occurs when a homeowner owes more on their property than the market value of the property, but their bank agrees to accept less than what is owed (through a purchase offer from a qualified buyer) as “payment in full,” in an effort to avoid the foreclosure process. In other words, under certain circumstances, if the homeowner is approved into the lender’s Short Sale Program, the lender may agree to “write-off” the portion of the mortgage that is higher than the value of a home.
What Other Options Do I Have?
If you are facing foreclosure, then you have several other options, besides a Short Sale:
A Short Sale prevents the homeowner from paying any fees related to the sale of the home, including commissions, closing costs (including a title search and appraisal), and usually, other liens against the property.
Please note: All short sale applicants have to be approved into the program by the homeowner’s lender. The lender will evaluate the owner’s financial situation, the value of the property, the cost of foreclosure, and any offer to purchase the property that is less than the amount owed.
What about Bankruptcy?
I think most of the homeowners I’ve worked with who either have filed bankruptcy or who are thinking of filing bankruptcy, do so because it gives them a sense of control over their situation. It also gives them a little relief from the feeling that someone is bearing down on them and getting ready to take their home away.
However, there are terms to every bankruptcy, and those terms have to be met in order for the bankruptcy to remain in full force and effect. In other words, if the judge sets up a payment plan for you, and you fall behind again for some reason beyond your control, the “stay” will be lifted and your lender and other creditors will move in to collect. The other issue is your credit. A bankruptcy will not help that.
If you are currently in a bankruptcy situation, you may still be able to qualify for the Short Sale remedy. Please call me to discuss.
For more information, please call CARMEN PARKER for a no-obligation, confidential consultation.