Foreclosure on your home in Texas is always going to be on the 1st Tuesday of the month. This is the sale date. If it is a holiday, it does not matter. Foreclosures are typically only halted when a tornado or any other natural disaster hits. If a Hurricane is scheduled to hit the region at least two days from the sale, I have seen sales go forward. The law mandates that you must get a 20 day notice via certified mail and also through first class mail before the sale. All of the liens to foreclose against the homestead in Texas require that a state lawsuit be filed and an order allowing the sale, before the sale is made, must be signed by a judge except in the cases of purchase money liens and federal tax liens.
Liens that are Valid against the homestead
There are six liens that are valid in Texas against the homestead:
- Purchase money liens
- Proper refinance home loans
- Improvements or mechanics liens
- Property and income taxes
- Homeowners association dues
- Owelty liens in divorce
All other liens against the homestead that do not qualify within the above-referenced categories are assumed void and cannot be foreclosed on, but they can cloud the title at closing.
Purchase Money Liens
Acquisition of Property
A lien for all or part of the purchase price of the property is valid as against a homestead. Before foreclosure can take place, the note must be accelerated and you would be given 30 days to cure the arrears or pay the note in full.
Refinancing the Homestead
In Texas refinancing is a term of art with the specific meaning that the existing lien is being acquired and equitably subrogated to the new lender, thus maintaining the same priority. Refinance in Texas does not occur with home equity loans even though the terms are used interchangeably in other states.
Improvements to Homestead
In order to obtain a valid lien against a homestead property for improvements, a mechanic lien contract must be entered into, in accordance with the Property Code Section 53.059. The written contract must contain the conditions of the agreement, character of material and cost of the work which is recorded before work is commenced although it is not fatal if recorded later and it must be signed before work is commenced and acknowledged by all the parties having an interest in the homestead.
If work was started on the ‘improvement to the homestead’ before a mechanic lien contract was entered into by the parties, the entire project should be bonded as set out in the Property Code Section 53.201 et. seq. or special escrow procedures should be followed throughout the construction period. It is necessary to have the joinder of both spouses when a mechanic lien contract is entered into if the property is the homestead of husband and wife even if the property in question is the separate property of one of the spouses. Once construction is finished, the mechanic lien may be renewed and extended into a permanent lien.
Property and Income Taxes
Both the federal tax and state property taxes have authority to foreclose and sale your property. The federal tax lien is filed without a suit. However, the state or county must file a suit and get an order from a district judge to foreclose on the property.
Homeowners Association Dues
Special assessments for condominium and townhome associations as well as those for homeowner associations may be foreclosed as against the homestead property. The homeowners’ association dues can be crammed in a chapter 13 bankruptcy to “0” should there be no equity in the house. In order for the homeowners to foreclose, a lawsuit must be filed first and a court order from a district judge must be obtained before foreclosure can proceed.
Most owelty situations involve a divorce. Should you be the lien holder, then you would need to record your interest for security purposes. If you are the debtor, then you have the right to cure it in a bankruptcy if you are in default.
Stopping a Foreclosure
There are 4 ways of stopping the sale of a property
1. Cure all arrears and bring the current amount
2. Pay the note off to bring the amount to a zero balance and get a release on the lien
3. File a bankruptcy
4. File a suit in a state court and apply for a temporary restraining order thus stopping the sale of the property
Filing a bankruptcy is the fastest and cheapest way to stop a sale. I would be able to file a state lawsuit to stop the sale, but you must post bond. The state suit is typically as much as or more expensive than a bankruptcy.