Texas Homeowner's Legal Rights During Foreclosure

Texas is a non-judicial foreclosure state, meaning lenders can foreclose without going to court. However, Texas law still provides significant protections for homeowners. This guide covers every legal right you have under the Texas Property Code, Texas Constitution, and federal law.

1. Right to Proper Notice

Under Texas Property Code §51.002, your lender must provide specific notices before foreclosing. Failure to provide proper notice can invalidate the foreclosure.

Notice of Default (20 Days Before Auction)

Your lender must send a Notice of Default at least 20 days before the foreclosure sale. This notice must:

• Be sent by certified mail to your last known address
• State the specific default (e.g., "missed 3 mortgage payments totaling $4,500")
• Provide the exact amount needed to cure the default
• Give you 20 days to cure the default before the sale

Notice of Sale (21 Days Before Auction)

Your lender must file a Notice of Sale with the county clerk at least 21 days before the auction. This notice must:

• Be posted at the county courthouse
• Include the date, time, and location of the sale
• Describe the property being sold
• State the earliest time the sale can occur (no earlier than 10 AM on the first Tuesday of the month)

2. Right to Cure the Default

Texas law gives you 20 days to cure the default after receiving the Notice of Default. "Curing" means paying all arrears plus fees to bring your loan current.

What You Must Pay to Cure

• All missed payments (principal + interest)
• Late fees (as specified in your mortgage contract)
• Property inspection fees (if the lender inspected the property)
• Attorney fees (if specified in your mortgage contract)
• Foreclosure costs (filing fees, posting fees, etc.)

Your lender must accept payment if you cure the default within 20 days. Once you cure, the foreclosure process stops, and your loan is reinstated.

3. Right to Reinstatement (Before the Auction)

Even after the 20-day cure period expires, you can still reinstate your loan by paying all arrears plus fees before the auctioneer's gavel falls. This is your last chance to stop the foreclosure.

How to Reinstate Your Loan

1. Contact your lender or their attorney immediately
2. Request a payoff statement (must include all fees and costs)
3. Pay the full amount by certified check or wire transfer
4. Obtain written confirmation that the foreclosure has been canceled

If you pay the full amount before the auction, your lender must cancel the sale and reinstate your loan.

4. Right to No Deficiency Judgment (Homestead Property)

Texas Constitution Article XVI, Section 50(a)(6) provides powerful protection against deficiency judgments for homestead property.

What is a Deficiency Judgment?

A deficiency judgment occurs when the foreclosure sale price is less than your loan balance. For example:

• Loan balance: $200,000
• Foreclosure sale price: $150,000
• Deficiency: $50,000

In most states, the lender can sue you for the $50,000 deficiency. But in Texas, if the property is your homestead, the lender cannot pursue a deficiency judgment.

5. Right to Challenge Wrongful Foreclosure

Texas law allows you to sue your lender for wrongful foreclosure if they violated foreclosure procedures. Common grounds for wrongful foreclosure include:

Common Wrongful Foreclosure Claims

• Improper Notice: Lender failed to send required notices or sent them to the wrong address
• Failure to Credit Payments: Lender foreclosed despite receiving timely payments
• Dual Tracking: Lender foreclosed while you were in an active loan modification process
• Lack of Standing: The entity foreclosing doesn't actually own your loan
• Breach of Contract: Lender violated terms of your mortgage agreement
• Violation of RESPA/TILA: Lender violated federal lending laws

If you win a wrongful foreclosure lawsuit, you may be entitled to:

• Reinstatement of your loan
• Damages for emotional distress
• Attorney fees and court costs
• Punitive damages (in cases of intentional misconduct)

6. Right to Bankruptcy Protection

Filing for bankruptcy triggers an automatic stay that immediately stops all foreclosure proceedings. This is a federal right under the U.S. Bankruptcy Code.

Chapter 13 Bankruptcy (Reorganization)

Chapter 13 allows you to keep your home by catching up on missed payments through a 3-5 year repayment plan. Benefits include:

• Stops foreclosure immediately
• Allows you to catch up on arrears over time
• Protects your home from future foreclosure (as long as you make plan payments)
• May allow you to "strip" second mortgages if your home is underwater

Chapter 7 Bankruptcy (Liquidation)

Chapter 7 provides temporary relief but does not allow you to catch up on missed payments. It can delay foreclosure by 3-6 months while your bankruptcy case is pending.

7. Right to Surplus Funds (If Sale Price Exceeds Loan Balance)

If the foreclosure sale price exceeds your loan balance plus fees, you are entitled to the surplus funds.

Example:

• Loan balance: $150,000
• Foreclosure sale price: $180,000
• Surplus: $30,000 (minus fees and costs)

Under Texas Property Code §51.003, the trustee (the person conducting the sale) must hold the surplus funds and distribute them in this order:

1. Pay off any junior liens (second mortgages, HOA liens, tax liens)
2. Pay the foreclosure sale costs
3. Pay the remaining surplus to you (the former homeowner)

8. Right to Fair Debt Collection Practices

The federal Fair Debt Collection Practices Act (FDCPA) protects you from abusive, deceptive, or unfair debt collection practices. Your lender and their attorneys must:

• Not harass you: No repeated phone calls, threats, or abusive language
• Not misrepresent the debt: Must provide accurate information about what you owe
• Not threaten illegal actions: Cannot threaten to foreclose without proper notice
• Validate the debt: Must provide proof that you owe the debt if you request it

If your lender violates the FDCPA, you can sue for damages, attorney fees, and court costs.

9. Right to Loan Modification (Federal Programs)

Federal law requires lenders to consider you for loss mitigation options before foreclosing. Under the Consumer Financial Protection Bureau (CFPB) rules, your lender must:

• Review your loan modification application (if submitted more than 37 days before the sale)
• Not foreclose while your application is pending
• Provide a written explanation if your application is denied
• Allow you to appeal the denial

This is known as the "dual tracking" prohibition—lenders cannot pursue foreclosure while simultaneously evaluating you for a loan modification.

10. Right to Redemption (Limited in Texas)

Unlike many states, Texas does NOT have a post-sale redemption period for non-judicial foreclosures. Once the gavel falls at the foreclosure auction, you lose all ownership rights immediately.

Exception: If your lender obtains a judicial foreclosure (through a court order), you may have a redemption period. However, judicial foreclosures are rare in Texas.

Summary: Your Legal Rights Checklist