Neighborhood/Homeowners Association Foreclosure
Hey y'alll' I'm abit new to this, but jumping on in.
I have a question about Texas foreclosures;
What relevance is the homeowners association forclosure?
It is a Sheriff's auction, selling along with the tax foreclosures.
If I won the bid on this, would I get a deed (with or without redemption period) or would this be secondary or worse to other liens?
Thanks beforehand for the help.
JOHN
The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, the property will be auctioned off to the highest bidder.
The nonjudicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower preauthorizes the sale of property to pay off the balance on a loan in the event of the their default.
In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee.
If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the nonjudicial power of sale foreclosure is carried out as follows: Prior to proceeding with a foreclosure, Texas laws state that the lender must mail the borrower a letter of demand, informing the buyer he has twenty (20) days to pay the delinquent payments or foreclosure proceedings will begin. At some point after the borrowers twenty (20) days have expired, but at least twenty one (21) days before the foreclosure sale, a foreclosure notice must be:
1) filed with the county clerk;
2) mailed to the borrower at their last known address; and
3) posted on the county courthouse door.
The foreclosure sale must take place on the first Tuesday of any month, even if said Tuesday falls on a legal holiday, but only after the proper preliminary notices have been given. The sale is on the courthouse steps by auction to the highest bidder for cash. Anyone may bid, including the lender, who bids by canceling out the balance due on the note, or some part of it.
Lenders may obtain deficiency judgments, but they are limited to the difference between the fair market value of the property at the time of sale and the balance of the loan in default.
You will want to review THE TEXAS CONSTITUTION (HOMESTEAD ACT), ARTICLE 16, SECTION 50
Most HOA liens are subordinate to the underlying mortgage. If the mortgage company decides to accelerate the underlying note, you the new owner may lose the property through foreclosure just as the previous one did if the underlying mortgage was not paid.
Under Texas Constitution, Art. 16, sec. 50, residence homesteads can be subject to foreclosure for failure to pay taxes, mortgages, home equity loans, and liens for repairs and renovation of the property. The Texas Supreme Court ruled in Inwood North Homeowners’ Association v. Harris (736 S.W.2d 632) that this provision does not protect homeowners against foreclosure for failure to pay monthly assessments by homeowner associations.
Homeowner associations can foreclose through either judicial or nonjudicial means. In judicial foreclosure, the association files a lawsuit, and an eventual legal judgment leads to the foreclosure. In nonjudicial foreclosure, which must be authorized by the deed restrictions, no judicial determination is made.
See http://www.vuwriter.com/vumanuals.jsp?displaykey=UMTX00000070 this site gives some great information on how a title company will see this issue.
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