Understanding the El Paso Foreclosure Process
If you are facing foreclosure, or simply want to buy a foreclosed property in El Paso, here is an explanation of the foreclosure process. Home buyers can use a real estate agent to assist with finding foreclosed homes, or they can simply keep an eye on public notices of foreclosures.
What Is Foreclosure?
If a borrower defaults on their mortgage payments, the mortgage lender has the option of taking possession of the property. The legal process for doing so is called foreclosure.
To recover the money that they have lost (known as loss mitigation) on the unpaid debt, mortgage lenders will often sell the property.
Reasons Foreclosures May Occur
There are many reasons why a borrower fails to pay their mortgage. It often happens in times of unemployment, divorce, or overwhelming debt. With the recent spike in COVID-19 cases, unemployment is certainly on the rise. Some people let their properties go into foreclosure on purpose, such as when the homeowner cannot afford to repair the property after a natural disaster.
While foreclosure is damaging to one's credit, it can provide relief to borrowers who can no longer afford their mortgages.
How the Foreclosure Process Works in Texas
If you have fallen behind on your mortgage payments, you are either in pre-foreclosure or foreclosure. Lenders can begin the foreclosure process anytime you fall behind on your payments. This can vary, however, as many lenders go longer and others will foreclose at the 90-day mark.
If you're still in pre-foreclosure, there is time to catch up on your payments and avoid foreclosure. You could attempt to sell your property, which is one of the best ways to protect your credit. You could also work with your lender to receive a loan modification or forbearance agreement that will allow you to catch up on your payments and avoid foreclosure.
When a seller attempts to sell real estate for less than the outstanding balance of their mortgage, it is called a short sale, and those transactions must be approved by the lender.
Texas Foreclosure Law
Foreclosure laws vary by state. In Texas, lenders use either a judicial or nonjudicial process to foreclose on deeds of trusts or mortgages that are in default.
Lenders file a lawsuit to obtain a court order to foreclose. The judicial process is employed when no power of sale clause is present in the mortgage or deed of trust. Once the court declares a foreclosure, a foreclosure auction will be held and the property sold to the highest bidder. This type of foreclosure is typical for home equity loans.
Nonjudicial foreclosure occurs when a power of sale clause exists in a deed of trust or mortgage. This clause states that the borrower pre-authorizes the sale of the property to pay off the balance of a loan in case of default. The power of sale clause gives the lender the right to sell the property by their representative, typically called the trustee.
The lender must send the borrower a letter of demand which informs them that they have 20 days to pay the delinquent payments or foreclosure will commence. Once the borrower's 20 days have passed and they are at least 21 days prior to the foreclosure sale, a foreclosure notice will be filed with the county clerk, mailed to the borrower at their last known address, and posted on the county courthouse door.
For more information on foreclosure in El Paso, feel free to contact our team at Acala Investments today!