This chapter summarizes the nonjudicial foreclosure process for real and personal property. A complete analysis of Texas foreclosure law is beyond the scope of this manual.
Texas Bar Books publishes the Texas Foreclosure Manual (William H. Locke, Jr., Ralph Martin Novak, Jr., G. Tommy Bastian, and Sara E. Dysart, eds., 2025 ed.) in a printed softbound format and in downloadable and online versions that offer enhanced word-processing forms and links to cases, statutes, and CLE articles. For a more in-depth understanding of this material before handling a foreclosure case, the Real Estate Forms Committee recommends reviewing the Texas Foreclosure Manual. That manual’s contents are listed in section 14.13 below.
This chapter includes commentary and forms from the Texas Foreclosure Manual, along with commentary and forms provided by the authors of this manual. These forms relating to nonjudicial foreclosures are examples only and should not be considered standard forms. Attorneys must review and revise the forms used in each foreclosure to reflect the applicable law and the terms of the loan documents subject to a nonjudicial foreclosure sale.
§ 14.1:1Deed of Trust as Contract
Although the deed of trust reads as if it is a conveyance, sale, or transfer of the mortgaged property to the trustee “in trust,” Texas law characterizes the transaction as creating a nonpossessory lien on the mortgaged real property and personal property collateral in favor of the mortgagee. A deed of trust is a mortgage with a power of sale. Johnson v. Snell, 504 S.W.2d 397, 399 (Tex. 1973); Cortez v. Brownsville National Bank, 664 S.W.2d 805, 810 (Tex. App.—El Paso 1984, no writ). The purpose of the deed of trust is to secure the repayment of the debt, and the deed of trust creates a lien against the mortgaged property. Financial Freedom Senior Funding Corp. v. Horrocks, 294 S.W.3d 749, 755–56 (Tex. App.—Houston [14th Dist.] 2009, no pet.). When a mortgagor executes a deed of trust to secure an extension of credit, the mortgagor conveys only equitable title to the mortgaged property and retains legal title. Flag-Redfern Oil Co. v. Humble Exploration Co., 744 S.W.2d 6, 8 (Tex. 1987); Leighton v. Leighton, 921 S.W.2d 365, 368 (Tex. App.—Houston [1st Dist.] 1996, no writ). Accordingly, before default and the pursuit of its remedies, the mortgagee is not entitled to possession, rentals, or profits from the mortgaged property. Taylor v. Brennan, 621 S.W.2d 592, 593 (Tex. 1981). Additional authority on the nature of the deed of trust includes Humble Oil & Refining Co. v. Atwood, 244 S.W.2d 637, 644 (Tex. 1951); Carroll v. Edmondson, 41 S.W.2d 64 (Tex. Comm’n App. 1931, judgm’t adopted); Armenta v. Nussbaum, 519 S.W.2d 673 (Tex. App.—Corpus Christi–Edinburg 1975, writ ref’d n.r.e.); Lucky Homes, Inc. v. Tarrant Savings Ass’n, 379 S.W.2d 386 (Tex. App.—Fort Worth 1964), rev’d on other grounds, 390 S.W.2d 473 (Tex. 1965); Pioneer Building & Loan Ass’n v. Cowan, 123 S.W.2d 726 (Tex. App.—Waco 1938, writ dism’d, judgm’t cor.); and Texas Loan Agency v. Gray, 34 S.W. 650 (Tex. App. 1896, writ ref’d). See Texas Foreclosure Manual § 6.1.
§ 14.1:2Contract Between Parties
The deed of trust is regarded as a binding contract between the mortgagor, the trustee, and the mortgagee. Certain statutory provisions apply notwithstanding an agreement to the contrary, including Texas Property Code section 51.002(d) (twenty-day notice of default and right to cure for lien on property used as debtor’s residence); Texas Property Code section 51.0075 (appointment of substitute trustee); Texas Property Code section 51.002(a–1); Texas Civil Practice and Remedies Code section 34.041(c); and Texas Tax Code sections 34.01(r-1) and 34.01(r-2) (date of foreclosure sale on first Tuesday or first Wednesday of month, depending on whether first Tuesday is January 1 or July 4); and Texas Business and Commerce Code chapter 22 (public sale of residential real property under power of sale). In addition, section 51.002 of the Property Code controls to the extent of any conflict between the terms of the deed of trust and the statute. See , . The deed of trust is typically executed only by the mortgagor and not by the trustee or mortgagee. The deed of trust must include a grant of the lien, a description of the real property and any other collateral, a description or identification of the debt and other obligations secured by the deed of trust, and a description of the defaults triggering the mortgagee’s right to pursue remedies. See Sunbelt Service Corp. v. Vandenburg, 774 S.W.2d 815, 817 (Tex. App.—El Paso 1989, writ denied). A general description of the debt is sufficient. Clementz v. Jones Lumber Co., 18 S.W. 599, 600 (Tex. 1891). A failure to state the amount of the debt secured by the deed of trust does not invalidate the deed of trust where the amount can be ascertained, or as long as the deed of trust is sufficient to identify the debt from other sources or by parol evidence. Barnett v. Houston, 44 S.W. 689, 692 (Tex. App. 1898, writ ref’d). Texas law does not require the maturity date of the debt to be stated in the deed of trust. Cadle Co. v. Butler, 951 S.W.2d 901, 909 (Tex. App.—Corpus Christi–Edinburg 1997, no writ). See Texas Foreclosure Manual § 6.1:1.
Although a power of sale is not necessary for the deed of trust to create a lien against the property described in the deed of trust, a power of sale is necessary to permit a nonjudicial foreclosure of the lien pursuant to the terms of the deed of trust and Texas Property Code section 51.002. See Bonilla v. Roberson, 918 S.W.2d 17, 21 (Tex. App.—Corpus Christi–Edinburg 1996, no writ). A trustee has no power to sell the mortgaged property except as provided for in the deed of trust. Slaughter v. Qualls, 139 Tex. 340, 162 S.W.2d 671, 675 (Tex. 1942). Section 51.002 provides the procedures for a nonjudicial foreclosure “of real property under a power of sale conferred by a deed of trust or other contract lien.” . In the absence of a power of sale, a nonjudicial foreclosure is unavailable. See Texas Foreclosure Manual § 6.1:2.
§ 14.1:4Contract Rights Restricted by Statute
Texas Property Code section 51.002 establishes the minimum requirements for a nonjudicial foreclosure of real property under the power of sale conferred by a deed of trust or other contract lien. See . If a provision in the deed of trust conflicts with the provisions in section 51.002, the provisions in section 51.002 control. See Wylie v. Hays, 263 S.W. 563 (Tex. Comm’n App. 1924, judgm’t adopted). The deed of trust can establish additional requirements for foreclosure, and if such requirements for foreclosure are established, those requirements must also be satisfied for there to be an effective foreclosure sale. Harwath v. Hudson, 654 S.W.2d 851, 854 (Tex. App.—Dallas 1983, writ ref’d n.r.e.); see also Faine v. Wilson, 192 S.W.2d 456 (Tex. App.—Galveston 1946, no writ). See Texas Foreclosure Manual § 6.5.
§ 14.2Real Estate Foreclosures
The lender must comply with any requirements set forth in the note, deed of trust, or other loan documents in making demand for payment and giving the debtor an opportunity to cure. Even without express notice requirements in the loan documents, it is clear that, unless properly waived, the lender must demand payment of past-due installments from the debtor before exercising the option to accelerate. Williamson v. Dunlap, 693 S.W.2d 373, 374 (Tex. 1985); Allen Sales & Servicenter, Inc. v. Ryan, 525 S.W.2d 863, 866 (Tex. 1975). In the case of a loan secured by a deed of trust, the notice must afford an opportunity to cure the default and “bring home to the [debtor] that failure to cure will result in acceleration of the note and foreclosure under the power of sale.” Ogden v. Gibraltar Savings Ass’n, 640 S.W.2d 232, 233 (Tex. 1982). See form 14-3 in this chapter for a letter to the debtor that includes a customary demand for payment. See also form 8-2 in the Texas Foreclosure Manual for a demand for payment and notice that a note has matured by its terms.
If the mortgaged property is the debtor’s residence, section 51.002(d) of the Texas Property Code requires that the debtor be given twenty days to cure the default before notice of foreclosure sale is given:
Notwithstanding any agreement to the contrary, the mortgage servicer of the debt shall serve a debtor in default under a deed of trust or other contract lien on real property used as the debtor’s residence with written notice by certified mail stating that the debtor is in default under the deed of trust or other contract lien and giving the debtor at least 20 days to cure the default before notice of sale can be given under Subsection (b).
. The notice of default required by section 51.002(d) does not literally have to use the word default as long as the notice puts the debtor on notice of the delinquency and gives the debtor twenty days to cure. Herrington v. Sandcastle Condominium Ass’n, 222 S.W.3d 99, 101 (Tex. App.—Houston [14th Dist.] 2006, no pet.). The debtor is entitled to the notice even if the loan originated before the passage of the statute. Rey v. Acosta, 860 S.W.2d 654, 657–58 (Tex. App.—El Paso 1993, no writ).
The address of the debtor for purposes of section 51.002(d) is the debtor’s last known address, being the debtor’s residence address unless the debtor provided the mortgage servicer with a written change of address before the notice of sale was mailed. . The debtor must inform the mortgage servicer in a reasonable manner of a change of address for purposes of being served with a notice of sale. . See Texas Foreclosure Manual § 8.4:3.
§ 14.2:2Notice of Intent to Accelerate
Unless the right to notice of intent to accelerate is waived by the debtor, the lender must give clear and unequivocal notice of its intent to accelerate. Shumway v. Horizon Credit Corp., 801 S.W.2d 890, 893 (Tex. 1991) (finding that waiver of “notice” is sufficient to waive notice of acceleration but not notice of intent to accelerate). The lender must give notice to the debtor of the holder’s intent to accelerate that states explicitly that failure to cure the default will result in acceleration of the entire debt and could lead to a foreclosure and, possibly, a deficiency judgment against the debtor if the proceeds from the foreclosure sale do not fully extinguish the secured debt. Ogden v. Gibraltar Savings Ass’n, 640 S.W.2d 232, 233 (Tex. 1982); Crow v. Heath, 516 S.W.2d 225, 228 (Tex. App.—Corpus Christi–Edinburg 1974, writ ref’d n.r.e.). In Ogden, the statement that “failure to cure such breach on or before [September 16, 1978] may result in acceleration of the sums secured by the Deed of Trust and sale of the property standing as security thereunder” was not “clear and unequivocal notice that Gibraltar would exercise the option [but] merely restated [the existence of] the option conferred in the deed of trust.” Ogden, 640 S.W.2d at 233–34. Although demand for payment and notice of intent to accelerate are distinct common law requirements, they are not separate requirements. The notice of intent to accelerate can be incorporated with the demand for payment. See form 14-4 in this chapter for a letter to a commercial debtor that includes a customary demand for payment, along with a customary notice of intent to accelerate. See also form 8-3 in the Texas Foreclosure Manual for a demand for payment and notice of intent to accelerate.
Additional cases on notice of intent to accelerate include Motor & Industrial Finance Corp. v. Hughes, 302 S.W.2d 386, 394 (Tex. 1957); Tamplen v. Bryeans, 640 S.W.2d 421 (Tex. App.—Waco 1982, writ ref’d n.r.e.) (holding that failure to give notice of intent to accelerate can result in foreclosure sale’s being set aside); Purnell v. Follett, 555 S.W.2d 761, 764–65 (Tex. App.—Houston [14th Dist.] 1977, no writ) (holding letter to debtor advising that default “in any of [debtor’s] monthly payments” would result in acceleration not broad enough to cover subsequent default in tax payments); and Crow, 516 S.W.2d at 228 (requiring notice of intention to accelerate to state explicitly that failure to cure default would result in foreclosure and would entail possibility of deficiency judgment). A fact issue sufficient to go to the jury was raised by the debtor’s testimony that he did not receive a letter notice of intention to accelerate in Dillard v. Broyles, 633 S.W.2d 636, 640–41 (Tex. App.—Corpus Christi–Edinburg 1982, writ ref’d n.r.e.). See Texas Foreclosure Manual § 8.4:4.
§ 14.2:3Notice of Acceleration
After the acceleration of the secured debt, the debtor must be told that the secured debt has been accelerated. See form 14-5 in this chapter and form 8-4 in the Texas Foreclosure Manual for a letter that advises the debtor that the indebtedness has been accelerated. The notice that the secured debt has been accelerated is distinct from and must be given after the notice of intent to accelerate. Shumway v. Horizon Credit Corp., 801 S.W.2d 890, 893–94 (Tex. 1991); Joy Corp. v. Nob Hill North Properties, 543 S.W.2d 691, 695 (Tex. App.—Tyler 1976, no writ) (holding that letter stating legal action will be taken not notice that acceleration has occurred).
Texas law is unclear whether a mere notice of foreclosure sale can serve as notice of acceleration. The Texas Supreme Court reserved judgment on this issue in Ogden v. Gibraltar Savings Ass’n, 640 S.W.2d 232 (Tex. 1982). The court stated, “We do not decide whether, after proper notice of intent to accelerate, a notice of trustee’s sale is sufficient to give notice that the debt has been accelerated.” Ogden, 640 S.W.2d at 234. In McLemore v. Pacific Southwest Bank, FSB, 872 S.W.2d 286, 291–92 (Tex. App.—Texarkana 1994, writ dism’d), the court found that the notice of foreclosure sale was effective as a notice of acceleration. See also Meadowbrook Gardens, Ltd. v. WMFMT Real Estate Ltd. Partnership, 980 S.W.2d 916, 919 (Tex. App.—Fort Worth 1998, pet. denied); Phillips v. Allums, 882 S.W.2d 71, 74 (Tex. App.—Houston [14th Dist.] 1994, writ denied). The McLemore court may have been indicating that there is a difference between merely posting a trustee’s notice of foreclosure sale as establishing the fact of acceleration (as opposed to giving notice of such acceleration to the debtor) and in filing suit for judicial sale. Most commonly, a separate notice of acceleration is given in addition to the notice of foreclosure sale. See form 14-5 in this manual for a notice of acceleration. See also form 8-5 in the Texas Foreclosure Manual, which serves as both a notice of acceleration and a transmittal letter for the notice of foreclosure sale. See Texas Foreclosure Manual § 8.4:5.
§ 14.2:4Trustees and Substitute Trustees
The process for appointing a substitute trustee radically changed with the codification of Texas Property Code section 51.0076 in 2015. As a result, a foreclosure professional may document the appointment of a substitute trustee by adding information to a legacy notice-of-sale form required by Property Code section 51.002(b). The appointment of substitute trustee is accomplished under this provision if it is signed by an attorney or agent of the mortgagee or mortgage servicer and contains the statutory disclosure found in section 51.0076(3). See . The effective date of the appointment is the date of the notice. Notice of the appointment may be permanently documented by recording the modified notice of sale in the real property records. See .
Most foreclosure practitioners believe that the power of the trustee to conduct a foreclosure sale is derived wholly from the terms of the deed of trust and that a trustee’s duties are fulfilled by complying with the terms of the deed of trust. Winters v. Slover, 251 S.W.2d 726, 728 (Tex. 1952); Peterson v. Black, 980 S.W.2d 818, 822 (Tex. App.—San Antonio 1998, no pet.). One of the purposes of this chapter is to alert foreclosure practitioners that much of the familiar case law dealing with trustees in a foreclosure context is now obsolete because of legislative changes. For convenience, unless the context dictates otherwise, the word trustee in this chapter means both “trustee” and “substitute trustee,” though in most foreclosures the person actually exercising the power to foreclose will be a substitute trustee.
Beginning in 2003, the Texas legislature recognized that the origination and servicing of mortgage loans secured by real estate were radically changing due to securitization. Lending institutions no longer kept loans in their own portfolios but sold the loans they originated into the secondary market to be pooled with similar loans as collateral for mortgage-backed securities. In addition, the valuable mortgage servicing rights for these securitized loans were sold to the highest bidder. Consequently, the originating lender was no longer the owner or holder of the note, the beneficiary of the deed of trust, or the mortgage servicer in charge of administering the foreclosure process if the loan went into default.
Texas was the first state to recognize the systemic changes in mortgage lending caused by securitization and amend its foreclosure statutes to allow the mortgage servicer of a borrower’s loan agreement to conduct a foreclosure if the loan went into default. See , . This change from owner to mortgage servicer made sense because in the new era of loan securitization, the mortgage servicer was the only entity that dealt with the borrower and managed all the loan-level activities related to the borrower’s account and loan agreement.
Along with the foreclosure administration change, the legislature effectively preempted much of long-standing case law that dealt with the trustee or substitute trustee who exercised the “power of sale” found in the security instrument if there was a breach of the borrower’s loan agreement. See , , .
Starting in January 2004, the legislature used the definition section in Texas Property Code section 51.0001 to adjust foreclosure law to match changing business practices resulting from securitization. For example, substitute trustee was defined as “a person appointed by the current mortgagee or mortgage servicer under the terms of the security instrument to exercise the power of sale.” . Two legislative sessions later, trustee was defined as “a person or persons authorized to exercise the power of sale under the terms of the security instrument in accordance with Section 51.0074.” .
The duties of trustee listed in Texas Property Code section 51.0074 effectively preempted much of the old case law related to responsibilities and duties of a trustee and settled whether more than one substitute trustee could be appointed to exercise the power of sale. See .
Further, Texas Property Code section 51.0074(b) provided that “a trustee may not be: (1) assigned a duty under a security instrument other than to exercise the power of sale in accordance with the terms of the security instrument; or (2) held to the obligations of a fiduciary of the mortgagor or mortgagee.” . Accordingly, if read in conjunction with Texas Property Code section 51.0025, which authorizes a mortgage servicer to “administer the foreclosure of property under Section 51.002,” a trustee’s sole statutory responsibility in a foreclosure context is to conduct the public auction of the property and distribute the sale’s proceeds. See , , . Section 51.0074 also made clear that, contrary to case law, the trustee is not a fiduciary of the mortgagor or mortgagee. .
The subject of innumerable appellate court opinions is the method and process for appointing a substitute trustee to exercise the power of sale found in a deed of trust or security instrument.
The legislature, however, has preempted all case law that holds a substitute trustee must be appointed according to the terms of the deed of trust with the phrase notwithstanding any agreement to the contrary in section 51.0075. . This phrase was first used in section 51.002(d) requiring the notice of default be sent according to subsection (b) and not the terms of the security instrument. . The legislature, by enacting section 51.0075(c) and (d), determined how a substitute trustee could be appointed, not the deed of trust. See Wylie v. Hays, 263 S.W. 563 (Tex. 1924), often quoted for the proposition that statutory law overrides contract terms; Home Building & Loan Ass’n v. Blaisdell, 290 U.S. 398 (1934), holding that an implied term in any contract is that the contract complies with statutory law; and Exxon Corp. v. Eagerton, 462 U.S. 176 (1983), noting that a state may impair contractual obligations when the impairment is reasonable and necessary to serve an important public purpose.
Because a substitute trustee is now appointed pursuant to Texas Property Code section 51.0075(c) and (d), the mortgagee, which means a grantee, beneficiary, holder, book entry system, last person assigned of record, or the last person to whom a security instrument has been assigned, can appoint or authorize a mortgage servicer to appoint a substitute trustee. See , . The mortgage servicer can then authorize an attorney to appoint a substitute trustee on behalf of the mortgagee to succeed to all the title powers and duties of the original trustee named in the security instrument. .
In the past, the appointment of a substitute trustee was the subject of much litigation because case law contained many nuances as to who could appoint, who had authority to appoint, and how an appointment was evidenced. This is no longer the case—statutory law now applies, regardless of the terms of the security instrument. The current mortgagee has the authority to appoint a trustee and a mortgagee can be the grantee, beneficiary, owner, or holder of a security instrument or note, or the holder or transferee of the note secured by the deed of trust. See , ; , . A substitute trustee is properly appointed and succeeds to all the title, powers, and duties of the original trustee as long as the mortgagee appoints the substitute trustee or authorizes the appointment of a substitute trustee by power of attorney, corporate resolution, or other written instrument to the mortgage servicer. The mortgage servicer can then authorize an attorney to appoint the trustee. . See Texas Foreclosure Manual § 11.1.
§ 14.2:5Appointment of Trustee
One of the collateral effects of Texas Property Code section 51.0075 is that much of the case law related to the appointment of a substitute trustee is now obsolete.
The appointment of a substitute trustee is straightforward:
(c)Notwithstanding any agreement to the contrary, a mortgagee may appoint or may authorize a mortgage servicer to appoint a substitute trustee or substitute trustees to succeed to all title, powers, and duties of the original trustee. A mortgagee or mortgage servicer may make an appointment or authorization under this subsection by power of attorney, corporate resolution, or other written instrument.
(d)A mortgage servicer may authorize an attorney to appoint a substitute trustee or substitute trustees on behalf of a mortgagee under Subsection (c).
(e)The name and a street address for a trustee or substitute trustees shall be disclosed on the notice required by Section 51.002(b).
. See forms 14-10 and 14-11 in this chapter and form 11-2 in the Texas Foreclosure Manual. The question often arises whether the appointment of a substitute trustee is valid if the appointment was dated before the person who signed the appointment acquired the lien. Even though the transfer of lien was executed after the appointment, if the “effective date” of the transfer—as expressly stated in the transfer document—was before the appointment, the appointment is valid. See Crowell v. Bexar County, 351 S.W.3d 114, 117 (Tex. App.—San Antonio 2011, no pet.) (assignment with effective date that preceded execution date had retroactive effect). See Texas Foreclosure Manual § 11.3.
sets out the requirements to appoint a substitute trustee in the notice of sale required by Texas Property Code section 51.002. See Texas Foreclosure Manual § 12.1:2.
§ 14.2:6Recording an Appointment
There is no statutory requirement that the appointment of a substitute trustee be recorded in the real property records. However, most appointments are recorded as an accommodation to title industry examiners who want some assurance that the person who signed the trustee’s deed was in fact appointed to conduct the sale. Recording an appointment in the real property records eliminates an inquiry from a title examiner months and even years after a sale seeking proof that the substitute trustee had the authority to conduct a sale.
There is old case law that holds if the deed of trust requires an appointment to be recorded, the appointment must be recorded. See, e.g., Faine v. Wilson, 192 S.W.2d 456, 459 (Tex. App.—Galveston 1946, no writ); Chandler v. Guaranty Mortgage Co., 89 S.W.2d 250, 254 (Tex. App.—San Antonio 1935, no writ). However, in University Savings Ass’n v. Springwoods Shopping Center, 644 S.W.2d 705, 706 (Tex. 1982), the Texas Supreme Court held that as long as the failure to record the appointment was not unfair to the mortgagor, there was no wrongful foreclosure. See Texas Foreclosure Manual § 11.4.
§ 14.2:7Notice of Nonjudicial Foreclosure Sale
Upon a default in the payment of the note or other obligations secured by the deed of trust, the noteholder must give the requisite notices of the foreclosure sale in accordance with the deed of trust and chapter 51 of the Texas Property Code. See Texas Foreclosure Manual § 12.1.
§ 14.2:8Contractual Requirements of Notice of Sale
Notice of a proposed foreclosure sale, to be effective, must comply with all the requirements set forth in the deed of trust and Tex. Prop. Code § 51.002. Most deeds of trust provide text similar to that of the one published as form 8-1 in this manual:
If directed by Lender to foreclose this lien, Trustee will—
D.1. either personally or by agent give notice of the foreclosure sale as required by the Texas Property Code as then in effect;
See Texas Foreclosure Manual § 12.2.
§ 14.2:9Statutory Requirements to Post, File, and Serve (Mail) Notice of Sale
Section 51.002(b) of the Texas Property Code requires that—
(b) Except as provided in Subsection (b–1), notice of sale, which must include a statement of the earliest time at which the sale will begin, must be given at least 21 days before the date of the sale by:
(1) posting at the courthouse door of each county in which the property is located a written notice designating the county in which the property will be sold;
(2) filing in the office of the county clerk of each county in which the property is located a copy of the notice posted under Subdivision (1); and
(3) serving written notice of the sale by certified mail on each debtor who, according to the records of the mortgage servicer of the debt, is obligated to pay the debt.
(b–1) If the courthouse or county clerk’s office is closed because of inclement weather, natural disaster, or other act of God, a notice required to be posted at the courthouse under Subsection (b)(1) or filed with the county clerk under Subsection (b)(2) may be posted or filed, as appropriate, up to 48 hours after the courthouse or county clerk’s office reopens for business, as applicable.
. The day on which the notice of sale is given is included, and the day of the foreclosure sale is excluded, in computing the twenty-one-day notice period. . Notice properly posted, filed, and mailed three weeks before the foreclosure sale date is timely.
See Texas Foreclosure Manual § 12.3.
§ 14.2:10Contents of Notice of Sale
The cases construing the relevant sections of Texas Property Code chapter 51 and its preceding statutes tend to impose only general descriptive requirements and have upheld notices of sale deemed to have sufficiently informed the public of the nature and condition of the property so as to attract bidders. See Hutson v. Sadler, 501 S.W.2d 728, 732 (Tex. App.—Tyler 1973, no writ); Stone v. Watt, 81 S.W.2d 552, 555 (Tex. App.—Eastland 1935, writ ref’d).
The object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of the time, place and terms of the sale. Notices are given for the purpose of securing bidders, and to prevent a sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the sufficiency of the notice; but if any mistakes or omissions occur in the notices of sale, which are calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes or omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto.
Hutson v. Sadler, 501 S.W.2d 728, 731–32 (Tex. App.—Tyler 1973, no writ).
With this background, it is recommended that the notice of sale should, at a minimum, contain the following: (1) a description of the security instrument, including recording information, the matured debt, and the legal description of the property to be sold at foreclosure, including any personal property in which a security interest is granted in the deed of trust; (2) a statement that a default under the secured debt exists; (3) a statement that the mortgage servicer has authorized the enforcement of the power of sale granted in the deed of trust; (4) a statement of the earliest time and date for, and the location of, the foreclosure sale; (5) the name and street address (and signature) of the trustee or substitute trustee; (6) a statement that the described property will be sold by public auction to the highest bidder for cash; (7) for any security instrument that also constitutes a security agreement, a statement that, under the authority of section 9.604(a) of the Texas Business and Commerce Code, the foreclosure sale will cover both real property and personal property in which a security interest is granted under the security instrument; (8) if the security instrument is being serviced by a mortgage servicer, disclosure of the existence of a servicing agreement between the mortgagee and the mortgage servicer, the name of the mortgagee, and either the address of the mortgagee or the address of the mortgage servicer if there is a servicing agreement for the security instrument; (9) the military rights disclosure; and (10) the statutory notice specified by if property to be foreclosed is located seaward of the Gulf Intracoastal Waterway. See Tex. Att’y Gen. Op. No. JM-834 (1987). See also sections 2.44 and 14.2:14 and form 4-14 in this manual.
In this chapter, see forms 14-12 and 14-13 for notices of trustee’s sale for a mortgagee and a mortgage servicer, respectively. See also form 12-3 in the Texas Foreclosure Manual, which is designed to be used whether the sale is being administered by the mortgagee or by the mortgage servicer pursuant to a written servicing agreement with the mortgagee. See Texas Foreclosure Manual § 12.4.
§ 14.2:11Suit for Deficiency—Real Property
In deficiency suits following nonjudicial foreclosure sales, any person against whom an action to recover a deficiency is sought may request the court to determine the fair market value of the real property as of the date of the sale. If the court determines that the fair market value exceeds the amount of the successful bid at the foreclosure sale, the debtor is entitled to an offset in the amount of the excess against the remaining indebtedness. See .
The debtor is entitled to a credit for the fair market value of the property whether a third party or the mortgagee is the successful bidder. The foreclosure sale price is not included in the factors listed for determining the fair market value of the property. The statutory list, however, is not exclusive. The mortgagee may be able to argue that the price brought at a contested sale is the fair market value. See Texas Foreclosure Manual § 13.7.
§ 14.2:12Residential Property—Nonjudicial Foreclosure Sales
Applicability of Consumer Statutes to Notices: Most loan situations will dictate that a notice of default, a notice of intent to accelerate, and a subsequent notice of acceleration be sent to the debtor before the statutorily required notice of foreclosure sale is sent. In the case of consumer debt, the initial communication with the debtor must contain the Miranda-style warning and the statutorily dictated notices provided by the federal Fair Debt Collection Practices Act. The attorney should review the loan payment history to verify that the demand being made to cure the loan default is correct.
The attorney should review the promissory note to obtain the information necessary to prepare the demand and notice letters and verify the amount of time that the borrower is given before the loan can be accelerated. Texas statutes require that a residential borrower be given at least twenty days’ notice of default and opportunity to cure. See . Many residential notes and deeds of trust afford the borrower a longer period of thirty days to cure a default as a prerequisite to accelerating the loan. In this event, the attorney should make sure that the demand and notice-of-default letters afford the borrower thirty days rather than twenty days to cure the loan default as required by Texas Property Code section 51.002.
All foreclosure notices required by Property Code section 51.002 must include a military rights disclosure that is the same as or similar to the promulgated language found in subsection (i). See . See forms 14-12 and 14-13 in this chapter for notices of trustee’s sale, form 14-36 for a military status affidavit, and form 14-37 for a military status declaration. See also form 8-2 in the Texas Foreclosure Manual.
See Texas Foreclosure Manual § 21.2:4.
Additional Protections for Residential Borrowers: The delinquent payment of ad valorem taxes may not be considered a default under a deed of trust or other contract lien if the owner of the residence has entered into an installment agreement for the payment of such ad valorem taxes.
A trustee or substitute trustee conducting a residential real property foreclosure may contract with an attorney to advise the trustee or substitute trustee and to administer or perform any of the trustee’s or substitute trustee’s functions or responsibilities under the deed of trust and chapter 51 of the Texas Property Code. . The trustee or substitute trustee may also contract with an auction company to arrange, manage, sponsor, or advertise a residential real property foreclosure sale. .
For residential real property foreclosures, a trustee or substitute trustee must also satisfy any applicable requirements of sections 22.004, 22.005, and 22.006 of the Texas Business and Commerce Code. If the successful bidder is not the mortgagee or the mortgage servicer, the trustee or substitute trustee must obtain the name, address, and other required information on certain parties submitting the highest and best bid. . The trustee or substitute trustee must also provide the winning bidder a receipt for the sale proceeds tendered; deliver the deed to the winning bidder or record the deed; and account for and distribute the sale proceeds, including maintaining the sale proceeds in a separate account, and maintaining a written record of all deposits and disbursements from the account. , .
A trustee or substitute trustee conducting a residential real property foreclosure may recover (1) the trustee’s or substitute trustee’s reasonable actual costs, (2) reasonable attorney’s fees incurred by the trustee or substitute trustee, (3) reasonable trustee’s or substitute trustee’s fees, and (4) the trustee’s or substitute trustee’s reasonable attorney’s fees in a suit based on a claim related to the sale if the suit is found to be groundless, in each instance payable from the sale proceeds in excess of the amount owed on the indebtedness secured by the residential real property. . Certain trustee’s or substitute trustee’s fees and expenses in a residential real property foreclosure are presumed to be reasonable if they do not exceed the amounts provided by law. .
If the federal government has a property interest that would be extinguished through foreclosure, including a security interest, lien, or mortgage, the government’s consent may be required to eliminate that interest; the government has a one-year right of redemption for certain liens eliminated by foreclosure of a superior lien without its consent. ; .
Before foreclosure, the federal tax lien records of the county in which the real property is located should be examined. If personal property secures the loan, the federal tax lien records of the secretary of state’s office or other appropriate office should also be examined. See . If the property is encumbered by an inferior federal tax lien filed more than thirty days before the scheduled foreclosure sale, the mortgagee or mortgage servicer must give a special notice to the Internal Revenue Service at least twenty-five days in advance of the sale. See . The Internal Revenue Code provides that unless a proper notice is given, a foreclosure sale will not affect the subordinate tax lien. In the case of real property, the IRS has a 120-day right of redemption following the sale, provided a proper notice was given. .
If the property is located seaward of the Gulf Intracoastal Waterway, as defined in , the purchaser should receive the statutory notice specified by that section. See (1987). See also section 2.44 in this manual and form 14-14 in this chapter.
§ 14.2:15Personal Property Included in Deed of Trust
If the deed of trust includes a security agreement for personal property, the real property foreclosure sale can include the personal property in which a security interest is granted in the deed of trust as part of the foreclosure. See . If personal property is sold in connection with the foreclosure sale of real property, the commercially reasonable standard of the Texas Business and Commerce Code does not govern the sale. Huddleston v. TCB-Dallas, 756 S.W.2d 343 (Tex. App.—Dallas 1988, writ denied).
§ 14.2:16Deed in Lieu of Foreclosure
The deed in lieu of foreclosure is a conveyance of the mortgaged property by the mortgagor to the lender (or to a person designated by the lender) in full or partial satisfaction of the debt owing on the secured promissory note, outside of a nonjudicial foreclosure sale.
See form 5-13 in this manual for a deed in lieu of foreclosure and, in the Texas Foreclosure Manual, form 3-10 for a warranty deed in lieu of foreclosure and form 3-11 for an agreement for a deed in lieu of foreclosure.
The court in Morrison v. Christie, 266 S.W.3d 89 (Tex. App.—Fort Worth 2008, no pet.), described this practice as follows: “No specific statutory scheme governs the format of this type of transaction, although the Texas Legislature provides some protections against undisclosed liens or encumbrances on the property to a holder of a debt secured by a deed of trust who accepts such a conveyance as payment.” Morrison, 266 S.W.3d at 93 (citing ). Texas common law concerning deeds in lieu of foreclosure has been significantly affected by the adoption of Texas Property Code section 51.006 in 1995, which reads:
(a)This section applies to a holder of a debt under a deed of trust who accepts from the debtor a deed conveying real property subject to the deed of trust in satisfaction of the debt.
(b)The holder of a debt may void a deed conveying real property in satisfaction of the debt before the fourth anniversary of the date the deed is executed and foreclosed under the original deed of trust if:
(1)the debtor fails to disclose to the holder of the debt a lien or other encumbrance on the property before executing the deed conveying the property to the holder of the debt in satisfaction of the debt; and
(2)the holder of the debt has no personal knowledge of the undisclosed lien or encumbrance on the property.
(c)A third party may conclusively rely upon the affidavit of the holder of a debt stating that the holder has voided the deed as provided in this section.
(d)If the holder elects to void a deed in lieu of foreclosure as provided in this section, the priority of its deed of trust shall not be affected or impaired by the execution of the deed in lieu of foreclosure.
(e)If a holder accepts a deed in lieu of foreclosure, the holder may foreclose its deed of trust as provided in said deed of trust without electing to void the deed. The priority of such deed of trust shall not be affected or impaired by the deed in lieu of foreclosure.
. See Texas Foreclosure Manual § 3.4:3.
Problem of Junior Lienholders and Other Junior Encumbrances: A deed in lieu of foreclosure is basically a sales transaction as of the date of the deed. A junior lienholder’s right of redemption is not automatically extinguished as in the case of a foreclosure sale. See Whiteside v. Bell, 347 S.W.2d 568, 570 (Tex. 1961) (citing R.B. Spencer & Co. v. May, 78 S.W.2d 665 (Tex. App.—Waco 1935, writ ref’d)); see also Jones v. Ford, 583 S.W.2d 821, 823 (Tex. App.—El Paso 1979, writ ref’d n.r.e.) (citing North Texas Building & Loan Ass’n v. Overton, 86 S.W.2d 738, 741 (Tex. 1935)).
In Flag-Redfern Oil Co. v. Humble Exploration Co., 744 S.W.2d 6 (Tex. 1987), after the date of the deed of trust, the mortgagor conveyed an undivided one-half interest in the minerals to Flag-Redfern’s predecessor in title. After the mineral conveyance, the mortgagor conveyed the mortgaged property, including all the mineral estate, to the lender for the stated consideration of the satisfaction of the original debt. After Humble acquired the property from the successors in interest of the lender, Humble discovered the prior mineral conveyance and brought suit to determine ownership of the interest. The Texas Supreme Court held that the deed in lieu of foreclosure did not cut off the conveyance of the one-half interest in the mineral estate. Additionally, the court stated, “There is no such deed as a deed in lieu of foreclosure.” Flag-Redfern, 744 S.W.2d at 8.
The court noted that “[i]t would be unfair to allow parties to make private conveyances, although judicially efficient, to the detriment of unknowing parties by foreclosing their right to bid at a trustee sale; to redeem their interests; to insist on the marshalling of assets.” The court also noted that notice is an integral part of judicial and nonjudicial foreclosure of a deed of trust. Flag-Redfern, 744 S.W.2d at 9.
The court further drew a distinction between cases involving a vendor’s lien and those solely involving a deed-of-trust lien. The court concluded that deed-in-lieu transactions involving a vendor’s lien include the right of rescission with the implied right to cut off the interests of intervening purchasers, whereas deed-of-trust transactions do not. Flag-Redfern, 744 S.W.2d at 9.
The court noted that Jones, 583 S.W.2d 821; North Texas Building & Loan, 86 S.W.2d 738; and Yett v. Houston Farms Development Co., 41 S.W.2d 305 (Tex. App.—Galveston 1931, writ ref’d) would have supported a different result in Flag-Redfern had the “deed in lieu” been in satisfaction of a vendor’s lien mortgage. The court stated that in such cases—
[a] deed conveying land but coupled with a lien for the unpaid purchase money equates [to] an executory contract that will ripen into a title in the purchaser when the obligation to pay the purchase money is met. Whiteside v. Bell, 347 S.W.2d 568 (Tex. 1961). Default can lead to rescission of the contract. This can be accomplished through foreclosure, or privately when the vendee executes a deed reconveying the property.
Flag-Redfern, 744 S.W.2d at 9.
But having accepted a deed in lieu of foreclosure, the lender/deed-in-lieu grantee in a deed-of-trust transaction may face an unpleasant choice, as it did in Flag-Redfern. Assuming the lender’s right to foreclose is still legally available (which the court noted was the case in Flag-Redfern) to cut off the intervening interests, the lender would have to foreclose its lien and subject the property to public bidding. If the debt is not significant compared with the then-current market value of the mortgaged property, the lender may not be the high bidder, and significant surplus sales proceeds may remain that would have to be distributed to all successors to the borrower (in Flag-Redfern, for example, to both Humble and Flag-Redfern). See Texas Foreclosure Manual § 3.4:3.
§ 14.2:17Home Equity Loan Lien Foreclosure
, authorizes a voluntary lien on a Texas homestead for a home equity loan. (See chapter 11 in this manual for a discussion of home equity loans.) A lien on a Texas homestead securing the payment of a home equity loan may be foreclosed only by court order. . Article XVI, section 50(r), directs the Texas Supreme Court to promulgate rules of civil procedure for an expedited court order, and, acting pursuant to that authority, the Texas Supreme Court adopted rules 735 and 736 of the Texas Rules of Civil Procedure. The court approved forms for expedited foreclosure proceedings on February 10, 2014 (Misc. Docket No. 14-9047, Feb. 10, 2014). The forms may be found at www.txcourts.gov/media/847145/expedited-foreclosure-forms-for-website.pdf. Although rules 735 and 736 do require a judicial order before proceeding with the foreclosure of a home equity loan lien, those rules do not otherwise change existing Texas real property foreclosure law. See . The right of a lender to foreclose a home equity loan lien therefore remains conditioned on an underlying default on the home equity loan. In this chapter, see form 14-31 for a notice of default and form 14-32 for a notice of acceleration for a home equity loan.
Rules 735 and 736 were substantially amended effective January 1, 2012.
Rule 736 provides the procedure for obtaining a court order to allow foreclosure of a lien containing a power of sale in a security instrument securing a home equity loan. . Forms 14-33 through 14-38 are forms promulgated by the Texas Supreme Court. In addition, the practitioner should review section 14.4:7 below for additional information on consumer debt collection activities.
Rule 736 establishes an expedited judicial procedure for obtaining a court order that allows a lender to proceed with the foreclosure of a home equity loan lien. Under the rule, a lender files an application (see form 14-33) in any court with appropriate jurisdiction in any county where all or any part of the real property is located, including probate courts. . The required contents of the application were changed when the rule was amended and are set out in detail in .
The process for service of a rule 736 application changed effective January 1, 2012. Under the previous rule, the applicant or applicant’s attorney mailed the application to the obligor and obligor’s attorney. The new rule requires the clerk of the court to prepare and serve a citation by both certified and regular mail for each respondent named in the application. A citation addressed to “the occupant of the property” must also be issued. . Other requirements for service by the clerk of the court may be found in .
A response to an application for a court order permitting the lender to proceed with the foreclosure of a home equity loan lien is due on the first Monday following the expiration of thirty-eight days from the date the citation was placed in the custody of the United States Postal Service. .
The response must be signed in accordance with rule 57 and may be in the form of a general denial under rule 92, except that the respondent must affirmatively plead the defenses relied on as set out in rule 736.5(c)(1)–(5). . The response may not state an independent claim for relief, and the court is required to strike any such claim without a hearing. .
The court must not conduct a hearing unless a response is filed. .
No discovery is permitted in a proceeding governed by rule 736, and the only issue to be determined is whether a party may obtain an order to proceed with foreclosure under applicable law and the terms of the loan agreement, contract, or lien sought to be foreclosed. , .
An order under rule 736 is without prejudice and has no res judicata, collateral estoppel, estoppel by judgment, or other effect in any other judicial proceeding.
If no response to the application is filed by the due date, the petitioner may file a motion and proposed order to obtain a default order. A default order must be granted by the court no later than thirty days after a motion is filed and served in accordance with the rules. The return of service must be on file with the clerk of the court for at least ten days before the court may grant the application. . The granting or denial of the application is not an appealable order. .
See form 14-38 in this chapter for an order granting an application that allows a lender to proceed with foreclosure of a home equity loan lien. The order must describe—
1.the material facts establishing the basis for foreclosure,
2.the property to be foreclosed by commonly known mailing address and legal description,
3.the name and last known address of each respondent subject to the order, and
4.the recording or indexing information of each lien to be foreclosed.
.
A proceeding under rule 736 is automatically stayed if a respondent files a separate, original proceeding in a court of competent jurisdiction that puts in issue any matter relating to the foreclosure before 5:00 p.m. on the Monday before the scheduled foreclosure sale. . A stayed proceeding is to be dismissed if no order has been granted. If an order has been signed, the court must vacate the rule 736 order. .
§ 14.2:18Property Owned by Military Servicemember
Property Code section 51.015 (1) prohibits any nonjudicial foreclosure of a dwelling owned by military personnel on active duty or within nine months after their active duty concludes; (2) provides that a court may, during the same active duty period and the nine months subsequent, either (a) stay a proceeding to judicially foreclose or enforce a mortgage lien or (b) modify the terms of any such mortgage, as necessary to preserve the interests of the parties; (3) authorizes the court to also issue similar orders of stay or take other actions to protect dependents of active duty personnel and third-party guarantors of the loan obligation; and (4) imposes a criminal penalty (class A misdemeanor) on any person who knowingly causes a foreclosure or seizure of property protected as set forth above. A borrower or guarantor may voluntarily waive these protections by written agreement contained in an instrument separate from the loan obligation. . Property Code section 51.015 includes many of the same protections for military servicemembers as does the federal Servicemember’s Civil Relief Act.
§ 14.3Personal Property Foreclosures
The foreclosure rules for personal property secured transactions are found at . There are four ways to foreclose a security interest in personal property collateral: as part of a real property foreclosure; by public disposition; by private disposition; and through strict foreclosure, accepting the property with or without a claim for a deficiency. Without foreclosing, a secured party may also collect amounts owed on collateral and enforce obligations of persons obligated on collateral.
A detailed discussion of the rules of personal property foreclosure is beyond the scope of this manual. Attorneys are encouraged to review the relevant provisions of chapter 9 of the Texas Business and Commerce Code and applicable case law before foreclosing a security interest in personal property.
A disposition of personal property collateral must be commercially reasonable, whether the disposition is public or private. . This requirement cannot be waived or varied. . The term commercially reasonable is a term of art, the meaning of which has been heavily litigated. The attorney should review the relevant case law on the particular type of personal property being disposed of to properly advise the client. Section 9.627 of the Code also gives guidelines for determining if conduct was commercially reasonable. .
§ 14.3:1As Part of Real Estate Foreclosure
If the security agreement covers both real and personal property, the secured party may elect to foreclose both under the real property laws. In that event, chapter 9 rules do not apply. .
§ 14.3:2Public Disposition vs. Private Disposition
The law of public and private foreclosure disposition of personal property collateral is found at , . A disposition includes a sale, lease, or license of personal property collateral. A public disposition is not defined in the Texas Uniform Commercial Code. The official comment to section 9.610 states that although “public disposition” is not defined, it is one at which the price is determined after the public has had a meaningful opportunity for competitive bidding. In other words, a “public disposition” is a disposition at an auction open to the public. “Meaningful opportunity” is meant to imply that some form of advertisement or public notice must precede the sale (or other disposition) and that the public must have access to the sale or disposition. .
Conversely, although a private disposition also is not defined in the Texas UCC, some commentators believe that a “private disposition” is any disposition that is not a “public disposition.”
A public-sale foreclosure or other public disposition of personal property collateral is more difficult for the secured party because every aspect of the disposition must be commercially reasonable. . Unlike a real estate foreclosure, for which a courthouse public auction is authorized, a public auction disposition of personal property collateral is appropriate only if that method of disposition is commercially reasonable for the collateral involved. With the existence of Internet auction sites, many types of personal property are sold at an Internet public auction. However, there may be some types of personal property for which a public auction disposition is not commercially reasonable. The manner of disposition must be commercially reasonable. A public auction disposition must be conducted fairly. Adequate advertising should precede the disposition to solicit potential bidders. Merely advertising in a local newspaper may not be “commercially reasonable,” particularly if a potential buyer for the property would ordinarily look elsewhere for advertisements offering that type of property for sale. The time and place of the public auction must be commercially reasonable. If there is a usual place or market for a public auction disposition of property of the type involved that is reasonably available, the collateral should be disposed of there. . “[I]f such ‘usual’ place or market is not reasonably available, a duly advertised public [disposition] may be held at another place if it is one which prospective bidders may reasonably be expected to attend, as distinguished from a place where there is no demand whatsoever for [property] of the kind.” . The collateral should be available for reasonable inspection by prospective bidders, either at the public auction disposition or at another place made known to the bidders. . In a transaction, other than a consumer transaction, if a secured party’s compliance with the provisions of chapter 9 is placed in issue, the secured party has the burden of establishing that its collection, enforcement, or disposition of the collateral complied with the statutory requirements. . A secured party should consider how it will establish that all aspects of its public auction disposition of collateral meet the commercially reasonable requirement before deciding to proceed in that manner. A secured party may elect to conduct a private disposition. A private disposition may offer lower transaction costs to the secured party. A private disposition must be an arm’s-length transaction.
There are two primary distinctions between a public disposition and a private disposition of personal property collateral. First, the secured party may purchase the collateral at a public disposition but generally may not do so at a private disposition. . Second, the debtor is entitled to notification of “the time and place” of a public disposition but is merely entitled to notification of “the time after which” a private disposition is to be made. .
The property may be sold or otherwise disposed of as a unit or in parcels and at any time and place and on any terms. . However, every aspect of the disposition must be commercially reasonable. . The obligation of the secured party to proceed in a commercially reasonable manner may not be waived by the debtor. .
Except as described below, the secured party must send a proper notification of disposition of collateral to the debtor and to any secondary obligor. Additionally, if the collateral is other than consumer goods, notice must be sent to any other person from whom the secured party has received, before the notification date, notification of a claim of an interest in the collateral and to any other secured party that has filed a financing statement that meets the requirements set out in section 9.611(c)(3)(B) or that has complied with certificate of title or other title registration laws. . Thus, for a disposition of collateral other than consumer goods, the foreclosing secured party has the duty of conducting a Uniform Commercial Code financing statement search to discover other potential secured parties and to notify any that are discovered. The attorney advising the secured party should carefully review section 9.611 and its comments to determine the filing offices to search and the period within which the search should be conducted. In a transaction other than a consumer transaction, a proper notification sent after default and ten or more days before the earliest time of disposition is deemed to be reasonable. . The secured party need not give notice of disposition of the collateral if the property is perishable, threatens to decline speedily in value, or sells on a recognized market (such as a publicly listed stock). . The debtor or a secondary obligor may waive its rights, but not the rights of other parties, to receive a notice of disposition of collateral by written waiver signed after default. .
The contents of a proper notice of disposition of collateral are set forth in section 9.613 for collateral other than consumer goods and in section 9.614 for consumer goods collateral. Those sections also include model forms, which when completed are deemed to provide sufficient information concerning the disposition. The debtor may not waive, or agree that the secured party may vary from, the notification requirements of those sections. See . Notices to consumers must also comply with the federal Fair Debt Collection Practices Act () and the Texas Debt Collection Act ().
The secured party may buy personal property collateral at a public disposition. . The secured party may buy personal property collateral at a private disposition only if the property is of a kind that is customarily sold on a recognized market or is the subject of widely distributed standard price quotations. .
If a foreclosing secured party does not comply with section 9.601 et seq., a court may order or restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions. . This section also sets out the damages for which a secured party may be liable, including minimum penalties in consumer transactions and nonconsumer transactions. See .
A contract for sale, lease, license, or other disposition of personal property as a result of a foreclosure includes the warranties relating to title, possession, quiet enjoyment, and the like that by operation of law accompany a voluntary disposition of like-kind property. . These warranties may be disclaimed or modified in a manner that would be effective to disclaim or modify the warranties in a voluntary disposition or by communicating to the purchaser an express disclaimer or modification of the warranties. .
The law of strict foreclosure is found at . The secured party may accept personal property collateral in full or partial satisfaction of the secured obligation only under the circumstances set forth in section 9.620. A secured party may not accept collateral in partial satisfaction of a secured obligation in a consumer transaction. .
A secured party that wants to accept personal property collateral in full or partial satisfaction of a secured obligation in a nonconsumer transaction must obtain the debtor’s consent. The secured party must send its proposal to do so to any person from whom the secured party has received, before the debtor consented to the acceptance, a notice of a claim of interest in the collateral and to any other secured party or lienholder that has a perfected security interest in the collateral either because of a filed financing statement that meets the requirements of section 9.621(a)(2) or because of compliance with certificate of title or other title registration laws. . If the secured party proposes to accept the collateral in partial satisfaction of the secured obligation, the secured party must also notify any secondary obligor. . A secured party that proposes to accept personal property collateral in full or partial satisfaction of a secured obligation thus has a duty to conduct a UCC financing statement search to discover other potential secured parties and to notify those that have filed a proper financing statement of the secured party’s proposal. Moreover, a secured party that accepts personal property collateral is liable to another secured party that should have been notified, but was not, for any loss resulting from the failure of the enforcing secured party to notify the other secured party. . The debtor may consent to the acceptance of collateral in partial satisfaction of the secured obligation only by a record authenticated after default. The debtor may consent to acceptance of collateral in full satisfaction of the secured obligation by authenticating a record (for example, signing a writing) after default or by failing to object to a properly sent proposal within twenty days after the proposal is sent. .
The secured party may not use strict foreclosure if—
1.the debtor does not consent ();
2.the secured party timely receives objection in writing from a party entitled to notice of the proposed strict foreclosure ();
3.the secured party is foreclosing a security interest in consumer goods and the debtor is in possession of the goods ();
4.the secured party is foreclosing a security interest in consumer goods and the debtor has paid more than 60 percent of the principal amount of the obligation (); or
5.in a consumer transaction, the secured party does not propose to satisfy the secured obligation in full ().
After default, the debtor may waive or modify limitations 1., 3., and 4. by an authenticated agreement. , .
§ 14.3:5Suit for Deficiency—Personal Property
The procedure for determining a deficiency or surplus is found in , .
In a consumer goods transaction in which either the debtor is entitled to a surplus or a consumer obligor is liable for a deficiency, the secured party must send a written explanation of the surplus or deficiency. If a surplus exists, the secured party must send an explanation of the surplus before or when the secured party accounts to the debtor and pays any surplus or within fourteen days of the debtor’s request for an explanation, whichever comes first. If a deficiency exists, the secured party must send an explanation of the deficiency when the secured party first makes written demand for the deficiency or within fourteen days of the debtor’s request for an explanation, whichever comes first. . A debtor or consumer obligor is entitled without charge to one response to a request for an explanation of the surplus or deficiency during any six-month period in which the secured party does not send one. The secured party may require payment of a charge not exceeding $25 for each additional response. .
The rules for an action to collect a deficiency other than in a consumer transaction are set forth in section 9.626. This section provides for the determination of the deficiency when the secured party fails to comply with the procedures set forth in section 9.601 et seq. Under this section, the liability of a debtor or a secondary obligor for a deficiency is limited to an amount by which the sum of the secured obligation, expenses, and attorney’s fees exceeds the greater of the proceeds the secured party realized or the amount the proceeds would have been if the secured party had proceeded in compliance with those provisions. . A court may not infer from section 9.626 the nature of the proper rule in consumer transactions and may continue to apply existing principles. . See Greathouse v. Charter National Bank—Southwest, 851 S.W.2d 173 (Tex. 1992); Tanenbaum v. Economics Laboratory, Inc., 628 S.W.2d 769 (Tex. 1982).
The lender’s rights are governed by subchapter F of article 9 of the Uniform Commercial Code () and the security agreement. Certain provisions, noted in , cannot be altered by the parties. Before exercising any contractual right under the security agreement, the attorney should review these subchapters.
§ 14.3:7Secured Party’s Collection Rights—Accounts, Intangibles, and Instruments
After default, or earlier if agreed, the secured party may notify an account debtor or other person obligated on collateral, such as the maker of a Business and Commerce Code chapter 3 negotiable instrument, to make payment or otherwise render performance directly to the secured party. . This remedy may enhance the secured party’s recovery because payments on the collateral would otherwise be paid to the debtor. This procedure requires no prior notice to the debtor. Cullen Frost Bank v. Dallas Sportswear Co., 730 S.W.2d 668, 669–70 (Tex. 1987). If a debtor or secondary obligor will be liable for a deficiency, a secured party must proceed in a commercially reasonable manner in collecting or enforcing the obligation of an account debtor or other person obligated on collateral. .
After default, unless otherwise agreed, the secured party may take possession of tangible personal property collateral. . The repossession must not breach the peace. This nonjudicial self-help remedy is useful in allowing the secured party to obtain possession without delay.
A debtor, any secondary obligor, or any junior secured party or lienholder may redeem the collateral from the secured party at any time before (1) the secured party has collected the collateral under section 9.607, (2) the secured party has disposed of the collateral or entered into a contract to dispose of the collateral under section 9.610, or (3) the secured party has accepted the collateral in full or partial satisfaction of the obligation under section 9.622. See , , . To redeem the collateral, a person must fulfill all obligations secured by the collateral and pay certain expenses and attorney’s fees. .
§ 14.3:10Secured Party’s Liability
If a secured party has not complied with section 9.601 et seq., a court may order or restrain collection, enforcement, or disposition of collateral. . Further, a secured party is liable for damages in the amount of any loss caused by a failure to comply with Texas Business and Commerce Code chapter 9. . In addition, certain violations of chapter 9 render a noncomplying secured party liable for statutory minimum penalties. .
Chapter 9 requires the secured party’s collection and enforcement rights to be exercised in a commercially reasonable manner. Evidence that a better price could have been obtained under a different foreclosure proceeding does not of itself establish that the sale was commercially unreasonable. A sale under judicial approval is deemed to be commercially reasonable, but the UCC does not require a secured party to seek such approval. See .
§ 14.4:1Collecting Necessary Documents
Although all major mortgage servicers and many other lenders have their own standard legal services referral forms, the attorney should have their own form instrument setting out the information the attorney desires from the client, as the attorney can use such a form as both a checklist for the information provided by the client under the client’s own legal services referral form and as the operative document in the event the client does not have its own referral form. In the Texas Foreclosure Manual, see form 2-1 for a loan referral questionnaire and form 2-2 for a loan referral acknowledgment.
The attorney’s goal is to obtain from the client all the documents and information necessary for the attorney to plan and implement the steps necessary to enforce the loan documents. Documents and information that the attorney should review include, but are not limited to—
•executed copies of all documents evidencing the loan transaction (such as the promissory note, the deed of trust, and any notices or disclosures delivered at closing) and all subsequent amendments or modifications to such documents;
•full names and the most current contact and address information for all parties who are either currently obligated on the loan (whether as maker or as a guarantor or assumptor of the loan) or who granted a lien or security interest against the mortgaged property securing the loan;
•the information necessary to perform a Department of Defense search on each individual who is an obligor on the loan and/or a mortgagor, including either the Social Security number or birth date of each such individual. See § 2.169 (Military Personnel—addressing the Servicemembers Civil Relief Act, formerly the Soldiers’ and Sailors’ Civil Relief Act);
•the loan payment history;
•statements of the loan amounts in default (note: even if the client agrees that the attorney may rely on the statements and calculations performed by the client, it is recommended that the attorney attempt to verify the calculations, as demands for improper amounts may jeopardize the validity of the entire collection effort and expose the client to significant counterclaims);
•the loan file comments or communication record;
•the mortgagee’s title insurance policy;
•lender/servicer title searches (if any) performed after the issuance of the mortgagee’s title insurance policy;
•appraisals of the mortgaged property;
•all correspondence sent to the loan obligors and mortgagors before engagement of the attorney (especially correspondence regarding alleged defaults, demands to cure, notices of intent to accelerate, and notices of acceleration);
•all correspondence sent to the client/lender/servicer by the obligors or the mortgagors (note: in addition to alerting the attorney to potential issues not evident on the face of the client’s file, such correspondence may reveal that the obligors or the mortgagors have sent a change of address notice, and the failure to send notices to the correct addresses under the loan documents and any applicable statutes may invalidate the entire collection effort by the attorney and potentially expose the client to significant counterclaims);
•verification of who has custody of the original loan documents and physical possession of the promissory note; and
•any other information that the attorney deems helpful in light of the particular circumstances of the loan.
See Texas Foreclosure Manual § 2.4.
§ 14.4:2Foreclosure Calendar and Checklist
It is highly recommended that the attorney prepare both a foreclosure calendar and a foreclosure checklist for each loan being handled by the attorney, as these instruments are a useful means of organizing and tracking the key steps in the foreclosure process for each particular loan. See Texas Foreclosure Manual § 2.6.
§ 14.4:3Foreclosure Documents Applicable to Real Property and Personal Property
The appropriate forms to use in any foreclosure depend on the facts of the transaction. These forms are examples only and should be used as a starting place for attorneys to draft foreclosure documents that comply with the nonjudicial foreclosure requirements governed by Texas and federal law, the terms set forth in the loan documents, and the course of dealing between the lender and borrower in each transaction. Sections 14.4:4 through 14.11 below provide a chronological analysis of the foreclosure process and references to forms for compliance.
The attorney should review with the client all the loan documents for the transaction. In transactions that cover long time periods, there may be modification agreements that would affect the foreclosure process. For example, a subordinate creditor may have obtained an agreement from the first secured creditor to receive a special notice of default or foreclosure. The attorney should verify with the client that no such agreements exist.
§ 14.4:5Statute of Limitations
The attorney should confirm that the statute of limitations has not barred any right to relief. A sale of real property under a power of sale contained in a deed of trust must be made not later than four years after the day the cause of action accrues. . However, a mortgage servicer may foreclose a security interest in personal property collateral notwithstanding that there is a limitations defense to the debt. Miller, Hiersche, Martens & Hayward, P.C. v. Bent Tree National Bank, 894 S.W.2d 828, 830 (Tex. App.—Dallas 1995, no writ).
§ 14.4:6Current Title, Abstract, and Tax Searches
The attorney should verify current information about the collateral and its ownership. Because tax liens are accorded priority over most other claims, the client must know the amounts of any delinquent taxes to be able to decide if the foreclosure is economically feasible. See .
The attorney should advise the client that title insurance coverage may be available. The limited preforeclosure policy (form T-98) is issued in connection with a mortgage in default to the named mortgagee or its assignee, a loan servicer, a trustee, or an attorney and insures as to matters recorded since the mortgage, including involuntary liens such as federal tax liens. See Procedural Rule P-43, Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas, available at www.tdi.texas.gov/title/titlem4g.html#P-43.
Fair Debt Collection Practices Act Notice: The forms in this chapter are drafted for use in nonconsumer transactions, to which federal and state fair debt collection acts do not apply. The Texas Property Code provides that a trustee or a substitute trustee is not a debt collector under Texas law. . If, however, the attorney wishes to try to adapt these forms for a consumer transaction, the notice contained in clause 14-7-1 in this chapter should be incorporated in the first correspondence the attorney has with the consumer. Additional modifications to the forms also may be required. Case law is unclear, and there is no Fifth Circuit authority on what additional collection efforts, if any, may be made during the thirty-day period during which the consumer may request debt verification. Nothing may be included with the notice that negates the notice or would lead an unsophisticated person to misunderstand the right to contest the debt. Chauncey v. JDR Recovery Corp., 118 F.3d 516, 519 (7th Cir. 1997) (demand that payment be received within thirty days or “a decision to pursue other avenues to collect the amount due will be made” found to contradict notice); Terran v. Kaplan, 109 F.3d 1428, 1434 (9th Cir. 1997) (statement that “[u]nless an immediate telephone call is made . . . we may find it necessary to recommend to our client that they proceed with legal action” held not a demand for payment and thus not contradictory or overshadowing). The safest course of action would be to send only the notice found in clause 14-7-1 and wait thirty days before making any other collection efforts. The attorney, as a debt collector under the federal and state acts, can be personally liable to the consumer for failure to comply with the acts and should review this area of the law with care. See section 2.98 in this manual.
Fair Credit Reporting Act: Any financial institution that extends credit to an individual and regularly and in the ordinary course of business reports negative information to a credit bureau must give its individual customers a clear and conspicuous written notice about reporting negative information. A financial institution complies with the notice requirement if the institution uses a model notice promulgated by the Board of Governors of the Federal Reserve System. There are two model notices, one that may be used before reporting negative information to a credit bureau and one that may be used after reporting negative information to a credit bureau. If the financial institution did not include the notice in its initial loan documentation or related communication, the notice should be given with the first correspondence concerning the foreclosure. ; . See clauses 14-7-2 and 14-7-3 in this chapter.
All foreclosure notices must be sent by certified mail and should be sent return receipt requested. For real estate foreclosures, the notice must be addressed to the debtor at the debtor’s last known address. . For personal property foreclosures, the notice should be sent to the address specified in the security agreement or other agreement or, if none, to any address reasonable under the circumstances. . For foreclosure of a debt secured by a debtor’s residence there is a presumption that the residential address is to be used for notice unless the debtor notifies the mortgage servicer otherwise. . For all other debts, the notices are sent to the last known address of the debtor as shown by the records of the mortgage servicer. . If there is doubt about the proper address, it is good practice to send the notice to each address in the file. If two borrowers reside at the same address, the attorney may wish to send the letter separately to each person at the address. Some attorneys also send a copy of the letter to each party by first-class mail to attempt actual delivery if the certified mail is not accepted by the borrower. Notice of delivery by first-class mail should be noted on the letter.
The mortgage servicer must give at least twenty days’ notice of default before posting the property for foreclosure if the property is the debtor’s residence. . See form 14-4 in this chapter for a notice of default and intent to accelerate.
A debtor is required to inform the mortgage servicer of any change of address of the debtor. . See form 14-2 in this chapter.
§ 14.5:1Letter to Reinstate Default Provisions
If the mortgagee has not insisted on strict performance of the loan documents in the past, the mortgagee should advise the borrower of its decision to strictly enforce the agreements in the future. Dhanani Investments, Inc. v. Second Master Bilt Homes, Inc., 650 S.W.2d 220, 222 (Tex. App.—Fort Worth 1983, no writ). See form 14-1 in this chapter and form 22-1 in the Texas Foreclosure Manual.
§ 14.5:2Notice of Maturity and Demand for Payment
If the note has matured by its own terms, the mortgagee or mortgage servicer should demand payment. See form 14-3 in this chapter.
§ 14.5:3Notice of Default and Intent to Accelerate
The notices of default and of intent to accelerate are waived in the promissory note form. See form 6-1 in this manual. However, Texas courts deem acceleration a harsh remedy. Shumway v. Horizon Credit Corp., 801 S.W.2d 890, 892–93 (Tex. 1991). Even if notices of default and of intent to accelerate have been expressly waived, many attorneys elect to send this notice, viewing the waiver more as a safeguard to protect the mortgagee from the complications of minor technicalities than as a license to foreclose on borrowers without notice or demand. See form 14-4 in this chapter.
§ 14.5:4Notice of Acceleration
The notice of acceleration is used if the mortgagee or mortgage servicer gives notice of intent to accelerate and the borrower fails to cure the default. See form 14-5 in this chapter and form 8-4 in the Texas Foreclosure Manual.
§ 14.5:5Reinstatement Agreement
Sometimes the mortgagee and the borrower will agree to continue the payment terms of the note after acceleration. However, once the maturity of a note is accelerated, limitations on the entire debt will begin to run. A reinstatement agreement should rescind the acceleration and reinstate the payment provisions in the note. See form 14-6 in this chapter and form 3-3 in the Texas Foreclosure Manual for a reinstatement, modification, renewal, and extension agreement.
§ 14.5:6Affidavit of Posting and Filing
The affidavit of posting and filing is not required by law, but it serves to document where and when the notice was distributed and will normally be required by title companies. See form 14-8 in this chapter. If a newspaper or other public advertisement is used, the company publishing the notice should provide an affidavit of the publication, and the attorney should provide a copy of the page for the client’s file. Some attorneys prefer to use a certificate form instead of an affidavit.
The affidavit of mailing is not required by law, but it serves to document legal notice mailing compliance and will normally be required by title companies. See form 14-9 in this chapter. Such an affidavit, completed and signed by a person knowledgeable of the facts, is prima facie evidence of service. . Some attorneys prefer to use a certificate form instead of an affidavit. In the Texas Foreclosure Manual, see form 11-4 for posting and filing an affidavit for a representative of a trustee, 11-5 for mailing an affidavit for a representative of a trustee, 11-6 for a mailing affidavit, and 11-7 for a composite affidavit for a trustee or substitute trustee.
§ 14.6Foreclosure Documents for Real Property
§ 14.6:1Appointment of Substitute Trustee
Forms 14-10 and 14-11 in this chapter may be used if the mortgagee or mortgage servicer wishes for someone other than the trustee named in the deed of trust to act. The appointment may also be made in the notice of trustee’s sale. See section 14.6:2 below. If required by the deed of trust, the appointment of substitute trustee must be recorded in the real property records before posting the notice of foreclosure. See form 11-2 in the Texas Foreclosure Manual.
§ 14.6:2Notice of Trustee’s Sale
Form 14-12 in this chapter has been adapted to include personal property that may be covered by the deed of trust and that the mortgagee may wish to foreclose on with the foreclosure of the real property. See section 14.2:7 above. Note that, once appointed, the substitute trustee is the trustee under the deed of trust and is referred to as such rather than as the substitute trustee.
The appointment or authorization of a trustee or substitute trustee made in a notice of sale is effective as of the date of the notice if the notice—
1.complies with sections 51.002 and 51.0075(e) of the Texas Property Code;
2.is signed by an attorney or agent of the mortgagee or mortgage servicer; and
3.contains a statement in all capital letters, bold-faced type, to read as follows:
THIS INSTRUMENT APPOINTS THE SUBSTITUTE TRUSTEE(S) IDENTIFIED TO SELL THE PROPERTY DESCRIBED IN THE SECURITY INSTRUMENT IDENTIFIED IN THIS NOTICE OF SALE. THE PERSON SIGNING THIS NOTICE IS THE ATTORNEY OR AUTHORIZED AGENT OF THE MORTGAGEE OR MORTGAGE SERVICER.
See . Form 14-13 in this chapter allows a mortgage servicer to administer a foreclosure under . See form 12-2 in the Texas Foreclosure Manual.
Forms 14-14 and 14-15 in this chapter, although not required by law, serve to document the sale. In the Texas Foreclosure Manual, see also form 14-2 for a foreclosure sale transcript and form 14-3 for a foreclosure sale attendance registration.
Form 14-16 in this chapter has been adapted to include personal property that may be covered by the deed of trust and that the mortgagee may wish to foreclose on with the foreclosure of the real property. See section 14.2:7 above. Note that, once appointed, the substitute trustee is the trustee under the deed of trust and is referred to as such rather than as the substitute trustee. In the Texas Foreclosure Manual, see form 14-7 for a foreclosure sale deed and form 14-8 for foreclosure sale bill of sale.
Deeds transferring an interest to or from an individual, including a trustee, must contain the confidentiality notice required by . See section 3.17 in this manual.
Form 14-17 in this chapter, although not required by law, serves to document the legal requirements of the sale. Title companies will normally require an affidavit from the trustee attesting to these matters. This form may be used as a stand-alone document or may be attached to the trustee’s deed. It may also be used in conjunction with the affidavit of posting and filing (form 14-8 in this chapter) and the affidavit of mailing (form 14-9 in this chapter) with the appropriate modifications.
§ 14.6:6Notice and Affidavit of Advancement
If the mortgagee advances funds to cure a default under the deed of trust to secure assumption or a similar form used to secure performance, the mortgagee should use the notice of advancement (form 14-18 in this chapter) and the affidavit of advancement (form 14-19 in this chapter) to protect its rights and put parties on notice of the payment.
If the property is subject to an Internal Revenue Service lien, the notification letter at form 14-20 in this chapter may be used. See section 14.2:5 above (information about the IRS lien) and form 4-5 in the Texas Foreclosure Manual for a letter to the IRS requesting a waiver of the right of redemption.
§ 14.6:8Rescission of Nonjudicial Foreclosure Sale
Texas Property Code section 51.016 provides a nonexclusive method for rescission of a non-judicial foreclosure sale of residential real property, as defined in section 51.016(a). See . Not later than the fifteenth day after the date of a foreclosure sale, a mortgagee, trustee, or substitute trustee may rescind the sale for one or more of these statutory reasons:
1.the statutory requirements for the sale were not satisfied;
2.the default leading to the sale was cured before the sale;
3.a receivership or dependent probate administration involving the property was pending at the time of sale;
4.a condition specified in the conditions of sale prescribed by the trustee or substitute trustee before the sale and made available in writing to prospective bidders at the sale was not met;
5.the mortgagee or mortgage servicer and the debtor agreed before the sale to cancel the sale based on an enforceable written agreement by the debtor to cure the default; or
6.at the time of the sale, a court-ordered or automatic stay of the sale imposed in a bankruptcy case filed by a person with an interest in the property was in effect.
.
The party rescinding the sale must serve written notice of rescission on the purchaser and each debtor obligated to pay the debt that describes the reason for the rescission and includes recording information for any affected trustee’s deed. . See form 14-40 in this chapter. This notice must be served by certified mail in the county where all or a part of the property is located. , (d). The rescinding mortgagee, trustee, or substitute trustee shall record in the real property records of the county in which the written notice of rescission is filed an affidavit stating the date the bid amount was returned together with the certified mail, electronic or wire transfer, or courier service delivery tracking information. . See form 14-41 in this chapter. This affidavit is prima facie evidence of the return of the bid amount. . A completed rescission restores the mortgagee and debtor to their respective title, rights, and obligations under the instrument relating to the foreclosed property that existed immediately before the sale. . No action challenging the effectiveness of a rescission under this section may be commenced, unless filed on or before the thirtieth calendar day after the notices of rescission are filed for recording. . A rescission under this section is not effective as to a creditor or subsequent good-faith purchaser for value. . Damages in a suit challenging the effectiveness of the rescission or resulting from the rescission are substantially limited to the amount of the bid price. See , (l). Specific performance is not available. .
§ 14.7Foreclosure Documents for Public Disposition of Personal Property
§ 14.7:1Waiver of Right to Notice After Default
A debtor or secondary obligor may waive its rights (but not the rights of other parties) to notice of a public disposition of personal property collateral, but the waiver must be signed after the default has occurred. . See form 14-21 in this chapter.
§ 14.7:2Notice of Public Disposition
The posted notice of public sale can be used for public posting and advertisement of the sale. The attorney should consider advising the client about the requirements of a commercially reasonable sale and the risks associated with it. See form 14-23 in this chapter.
Texas Business and Commerce Code section 9.613 sets forth an approved form for notice of public or private disposition of personal property collateral other than consumer goods. See . The approved form for notification of public or private disposition of personal property collateral that consists of consumer goods is set out in section 9.614. See . Notice must be sent to the debtor, any secondary obligor, and, if the collateral is other than consumer goods, any other person from whom the secured party has received, before the notification date, an authenticated claim of interest in the collateral, and any other secured party or lienholder described in section 9.611(c)(3)(B), (c)(3)(C). See . See form 14-28 in this chapter for when collateral is consumer goods and form 14-29 in this chapter for when collateral is not consumer goods.
The agenda of public sale is not required by the Uniform Commercial Code, but it serves to document that the sale was completed. See form 14-24 in this chapter.
The bill of sale evidences the transfer of ownership of the personal property to the successful bidder. See form 14-25 in this chapter. If applicable, a disclaimer of warranties should be included. To disclaim warranties, the attorney must use language similar to that provided in .
§ 14.8Strict Foreclosure of Personal Property
§ 14.8:1Notice of Strict Foreclosure
The notice of strict foreclosure notifies the debtor and others required to be notified of the secured party’s proposal to accept personal property collateral in satisfaction of the debt. See . See form 14-26 in this chapter for a notice of strict foreclosure.
§ 14.8:2Consent to Strict Foreclosure
The debtor must consent to the secured party’s proposal to accept the collateral in satisfaction of the debt. . The consent may be an express consent made by the debtor agreeing to the secured party’s proposal in a writing signed after default. . See form 14-22 in this chapter for a consent form.
§ 14.8:3Objection to Strict Foreclosure
A letter of objection notifies the secured party of a person’s objection to the secured party’s proposal to accept the collateral in satisfaction of the debt. See form 14-27 in this chapter. The letter may be sent by any person to whom the secured party sent its proposal to accept the collateral. To be effective, the objection letter must be received by the secured party within twenty days after the date the secured party sends its proposal. .
§ 14.9Private Disposition of Personal Property
§ 14.9:1Waiver of Notice After Default
A debtor or secondary obligor may waive its rights (but not the rights of other parties) to notice of a private disposition of personal property collateral, but the waiver must be signed after the default has occurred. . See form 14-21 in this chapter.
§ 14.9:2Notice of Private Disposition
Texas Business and Commerce Code section 9.613 sets forth an approved form for notice of public or private disposition of personal property collateral other than consumer goods. See . The approved form for notification of public or private disposition of personal property collateral that consists of consumer goods is set out in . Notice must be sent to the debtor, any secondary obligor, and, if the collateral is other than consumer goods, any other person from whom the secured party has received, before the notification date, an authenticated claim of interest in the collateral, and any other secured party or lienholder described in section 9.611(c)(3)(B), (c)(3)(C). . See form 14-28 in this chapter for collateral that is consumer goods and form 14-29 for collateral that is not consumer goods.
§ 14.9:3Memorandum of Private Sale
The agenda of private sale is not required by the Uniform Commercial Code, but it serves to document that the sale was completed. See form 14-30 in this chapter.
The bill of sale evidences the transfer of ownership of the personal property to the buyer at the private foreclosure sale. See form 14-25 in this chapter. If applicable, a disclaimer of warranties should be included. To disclaim warranties, the attorney must use language similar to that provided in .
§ 14.10Security Interest Included in Deed of Trust
If the deed of trust contains the security interest covering personal property, the lienholder may foreclose the personal property lien with the real property foreclosure. .
§ 14.11Collateral Transfer of Note and Lien Foreclosure
The collateral transfer of note and lien form creates a security interest in an instrument, the collateral promissory note. The foreclosure of the collateral note under a collateral transfer is governed by the Texas Business and Commerce Code rather than by the Texas Property Code. See . The secured party may select any procedure applicable to the situation: strict foreclosure, public disposition, or private disposition. Without foreclosing on the collateral note, the secured party may collect and enforce the collateral note, including, if the collateral note is in default, accelerating the collateral note and exercising any foreclosure remedy contained in the underlying deed of trust. See the collateral transfer of note and lien, form 9-8 in this manual.
§ 14.12Texas Foreclosure Manual Contents
Following are the contents of the Texas Foreclosure Manual (William H. Locke, Jr., Ralph Martin Novak, Jr., G. Tommy Bastian, and Sara E. Dysart, eds., State Bar of Texas, 2025 ed.).
1.Attorney-Client Relations in the Foreclosure Process
2.Getting Started—Information Required
3.Evaluating the Options for Collecting the Debt
4.Preforeclosure Title Concerns
5.The Note in Foreclosure
6.The Deed of Trust
7.Consumer Debt Collection Laws
8.Demand for Payment, Notice of lntent to Accelerate, and Notice of Acceleration
9.Collection of Rent by Lender before Foreclosure
10.Borrower Challenges to Foreclosure and Lender Responses
11.Trustees and Substitute Trustees
12.Notice of Foreclosure Sale
13.Bid Evaluation
14.Conducting the Sale
15.Postsale Considerations
16.Consequences of Wrongful Foreclosure
17.Suits for Deficiency
18.–19. Reserved
20.Judicial Foreclosure
21.Residential Foreclosure Process
22.Commercial Foreclosure Process
23.Tax Consequences of the Foreclosure Process
24.Foreclosures Resulting from Ad Valorem Taxation
25.Property Tax Loan Foreclosure Process
26.Deceased Mortgagor Foreclosure Process
27.Condominium Foreclosures
28.HEL/HELOC Foreclosure Process
29.Manufactured Housing Unit Foreclosure Process
30.Property Owners’ Association Foreclosure Process
31.Reverse Mortgage Foreclosure Process
32.USDA Farm, Ranch, and Housing Loan Foreclosures
33.Servicemembers Civil Relief Act
34.Residential Evictions Following Foreclosure
35.Environmental Issues Affecting the Foreclosure Process
36.Federal and State Foreclosure Assistance Programs
37.Miscellaneous Topics
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