In order to stop foreclosure in the state of Texas, homeowners need to be aware of certain factors relevant to foreclosure law in Texas, and more specifically, the provisions and type of security instrument attached to their existing home loan. The state of Texas uses both mortgages and deeds of trust, and in turn, the state affords lenders remedy through both judicial foreclosure and power of sale, non-judicial foreclosure. If uncontested, a power of sale foreclosure can take as little as sixty days, with the legal right to claim deficiency liens on outstanding debts versus the fair market value of a property. For homeowners facing default on mortgages or deeds of trust, knowing your options when it comes to preventing foreclosure is the first step to saving your home, or at the very least, getting rid of existing mortgage loan debts.
Deal Directly with Your Lender before Default Occurs
The majority of foreclosure prevention options will require approval beforehand from a homeowner’s lender. Maintaining frank and consistent contact with your lender, and most likely their loss mitigation department, is the first method of foreclosure prevention. Typically, lenders will have a number of options available to struggling homeowners to prevent foreclosure, which is in the best interest of the lender, as well as the homeowner. The most common and easiest measures to prevent default or foreclosure through your lender, if approved include:
- Forbearance requests: If approved by your lender, a forbearance request will allow a homeowner to miss or make partial payment on their monthly home loan for a set period, typically a few months. This temporary relief is often enough for many homeowners, such as those transitioning between places of employment, to gain enough financial stability to make future payments. The unpaid money from the forbearance period is then built back into the life of the existing mortgage or trust deed.
- Loan modifications: Lenders will frequently offer various forms of loan modifications to homeowners, as a longer-term method of preventing default and foreclosure. These modifications may include lengthening the life of a loan, adjusting the rates affixed to a loan, or other adjustments, which ultimately seek to make meeting monthly payment obligations more manageable for a given homeowner.
- Loan refinancing: Loan refinancing offers, whether through one’s existing lender or another, will repay existing mortgage or trust deed obligations, and in turn, enter a homeowner into an entirely new mortgage loan agreement, typically with terms and rates more favorable to the homeowner, if done properly.
Consult with Federal Counselors on Your Eligibility for Federal Foreclosure Relief Assistance
Counseling and other informational assistance is available without charge from federally approved counselors through the HUD and FHA. These counselors provide insight, guidance, and other assistance to struggling homeowners throughout all fifty states, including Texas, concerning ways and methods of preventing foreclosure in homes across America. Aside from numerous applicable Texas statutes concerning foreclosure and foreclosure prevention, the federal government has also passed several pieces of legislation aimed at assisting struggling homeowners facing default or foreclosure:
- The Mortgage Forgiveness and Debt Relief Act of 2007, which alongside the Emergency Economic Stabilization Act, affords homeowners the ability to discharge forgiven mortgage debts without these amounts becoming taxable income under IRS statutes
- The HOPE for Homeowners Act, which provides incentives to lenders that offer homeowners several forms of adjustments and other modifications to their existing home loan agreements, including lowering high interest rates and adjusting variable rate mortgages into fixed rate
- The Homeowner Affordability and Stability Plan, which gives lenders incentives to offer homeowners additional forms of refinancing to address the inability of many homeowners to meet payments required on variable rate mortgages. The program incentives provide FHA backed, fixed rate, long-term mortgages to certain eligible homeowners.
Through HUD counselors or your foreclosure lawyer, you can learn more about current Texas specific statutes and other pieces of legislation in place that may benefit your attempts to stop foreclosure on your home.
Look into Deed in Lieu of Foreclosure and Short Sale Alternatives
In many cases of impending default or foreclosure, homeowners are seeking a permanent reprieve from overburdening loan obligations related to a home, while in other cases, the financial feasibility of remaining in one’s current residence simply does not exist. In these instances, homeowners will often initially seek to sell their home on the market, which unfortunately, is not often as eager to buy as homeowners may wish. In these cases, lenders once again offer homeowners certain transactions that may prevent foreclosure, and benefit both the homeowner and the lender. The two most notable of these transactions, include:
- Short sales, which entail a homeowner selling their home to a third party buyer for a predetermined amount, which is less than the total amount owed on an outstanding mortgage or deed of trust. In a prearranged deal, the lender will agree to accept the proceeds from the home sale and forgive any debt left short following the sale, hence the term “short sale”.
- Deed in Lieu of Foreclosure, which entails simply returning the deed or title to a given property to the lender, in exchange for the lender forgiving any outstanding mortgage obligations or obligations related to a deed of trust.
In both instances, homeowners can avoid foreclosure, while also preventing deficiency liens that may arise following a foreclosure auction.
Consider Chapter 7 and Chapter 13 Bankruptcy to Stop Foreclosure
One final method, although probably more applicable to homeowners facing an overall debt crisis including foreclosure, is to use bankruptcy laws to prevent foreclosure. Under existing bankruptcy laws, any debtor filing for bankruptcy will have an automatic stay put on all creditor collections attempts, which would include foreclosure proceedings. In addition to the temporary prevention of foreclosure actions, the following chapters of bankruptcy may afford debtors the following options regarding foreclosure:
- Chapter 7, which will entail a liquidation of assets and a discharge of debts under this form of bankruptcy. Included in the discharge of debts will be mortgage or deed of trust debts, and on the other hand, the assets being liquidated will require the sale of one’s home and other property. However, exemptions for homesteads under both federal and state exemption lists do exist, which in the state of Texas includes an unlimited dollar amount related to the primary residence.
- Chapter 13, which will entail reorganization of all outstanding debt obligations under the supervision of a bankruptcy trustee, can consolidate and reduce all debts drastically, if negotiations with creditors work out in the favor of a debtor. If a debtor continues to meet the monthly payment requirements set forth by a bankruptcy trustee, the debtor will be able to prevent foreclosure and remain in their home.
Getting Legal Help with Stopping Foreclosure in Texas
Having a lawyer assist with the overall management of a foreclosure prevention strategy is important. Aside from ensuring the legality of decisions and actions taken to prevent foreclosure, an attorney with experience in dealing with foreclosure cases will know applicable state and federal laws, as well as be able to gauge the willingness of lenders, in order to achieve a favorable outcome for struggling homeowners.
