Lenders may obtain deficiency judgments in Texas. The amount of the judgment is limited to the difference between the fair market value of the property at the time of the public foreclosure auction sale and the loan balance. Under Texas Property Code Section 51.003, any action for a deficiency judgment must be brought within two years from the foreclosure sale date. The borrower has the right to request that the court determine the fair market value of the property as of the foreclosure sale date by presenting expert testimony and/or comparable sales to the court for their review. If the court makes a determination that the fair market value was more than the loan balance, then the lender will not be able to collect a deficiency judgment. However,declining home values the past few years have resulted in more favorable conditions for lenderst o collect deficiency judgments. So if your lender has foreclosed on your property, you could be liable for the judgment. You should speak with a Texas foreclosure defense attorney for advice.
Why Lenders Usually Don’t Pursue Deficiency Judgments
Although lenders have the right to obtain deficiency judgments in Texas, that does not mean that your lender will pursue one against you. It does mean that you should be aware that they could. There are several reasons why lenders normally don’t pursue judgments of this nature including the following:
- It costs the lender time and money to pursue the judgment.
- Lenders realize that most of their borrowers don’t have any assets to go after.
- They may not have a valid address to serve the borrower at after the foreclosure.
Lenders really don’t like suing their former customers. They would like to keep the option of doing business with you again someday.
What to Do?
If you are facing foreclosure, you should try and work out a solution with your lender so that you can keep your home such as a mortgage modification, reinstatement, forbearance or refinance. Lenders would rather negotiate with you than have to foreclosure and then obtain a judgment. If you cannot afford the modified payments and need to sell, it’s better to negotiate a short sale or deed in lieu with your lender. Be sure to get something in writing from the lender stating that the transaction satisfies your mortgage debt so they don’t try and collect a deficiency judgment against you.
Consult with an Attorney
It is always recommended that you consult with a Texas foreclosure defense attorney if your lender has filed a deficiency judgment against you. The attorney can explain the Texas deficiency judgment laws and negotiate a settlement between you and your lender.
