The COVID-19 pandemic has left many families struggling to make their financial ends meet. According to CoreLogic, 7.3% of mortgages in the US were in some form of delinquency in May 2020—the highest rate since August 2014. Delinquency rates have increased in every state across the US. Severely delinquent mortgages (90+ days past due) may be at risk of foreclosure.
The Pre-Foreclosure Process
Before a foreclosed property can be sold, the borrower must be properly notified in accordance with the federal Fair Debt Collection Practices Act (FDCPA; 15 U.S.C. §§ 1692–1692p.) and the Texas Debt Collection Act (Chapter 392 of the Texas Finance Code). The lender must also follow the appropriate loss mitigation procedures governed by the Federal Truth in Lending Act (TILA) for delinquent residential loans, excluding home equity loans.
Lenders must follow these steps to properly notify the borrower of the impending foreclosure:
- Gather all relevant information and documentation.
- Send a notice of default to the borrower. Lenders must give the borrower an opportunity to remedy the default prior to accelerating the debt.
- Send a notice of intent to accelerate, and a notice of acceleration. If the default is not paid by the deadline established by the deed of trust, the lender must send a notice of intent to accelerate and a notice of acceleration to the borrower’s last known address.
- Provide the borrower with notice of the sale of the property. Following Tex. Prop. Code §51.002, the lender must provide the borrower with 21 days’ notice, and include the earliest date the sale will take place.
Tips for a Smooth Process
Failure to follow the proper procedures could result in the foreclosure falling through. Prior to notifying the borrower, lenders should ensure that all original documentation is correct and accessible, including reviewing the payment history to determine if the default is legitimate.
All notices, including loss mitigation package information, must be sent in proper order. Notification must be sent via both certified mail (with receipt requested) and regular U.S. Mail. Lenders must follow the appropriate calendar deadlines for notification, and be mindful of local regulations regarding holidays, natural disasters, and pandemics.
The law firm of Hoover Slovacek has over 40 years of experience with real estate law in Houston TX, including residential foreclosures. Visit our website or call (713) 977-8686 to learn more about how we can help both lenders and borrowers navigate the foreclosure process.