12 Aug Texas Legislative Update
The Texas legislature recently amended its laws governing foreclosure by a property owners’ association, the rescission of a nonjudicial foreclosure sale, the appointment of a trustee in a notice of sale, and the laws governing acceleration of the maturity date of a note, and recording requirements. All the legislation discussed in this memorandum is effective September 1, 2015.
TEXAS SENATE BILL 1168
A property owners’ association may not file an application for an expedited court order authorizing foreclosure of the association’s assessment lien or a petition for judicial foreclosure of the association’s assessment lien unless the association has, in addition to previous requirements, provided the recipient of the notice an opportunity to cure the delinquency before the 61st day after the date the association mails (previously recipient receives) the notice.
Notice may be provided to any holder of a lien of record on the property.
Except as provided below, a property owners’ association may not foreclose a property owners’ association assessment lien unless the association first obtains a court order in an application for expedited foreclosure under the rules adopted by the Texas Supreme Court. A property owners’ association whose dedicatory instruments grant a right of foreclosure is considered to have any power of sale required by law as a condition of using the procedure described above.
A property owners’ association authorized to use the procedure described above may in its discretion elect not to use that procedure and instead foreclose the association’s assessment lien under court judgment foreclosing the lien and ordering the sale.
The above provision does not affect any right an association that is not authorized to use the procedure described above may have to judicially foreclose the association’s assessment lien.
TEXAS HOUSE BILL 2066
The following provisions apply only to a nonjudicial foreclosure sale.
“Residential Real Property” means:
· A single family home, duplex, triplex, or quadraplex; or
· A unit in a multiunit residential structure in which title to an individual unit is transferred to the owner of the unit under a condominium or cooperative system.
Not later than the 15th calendar day after the date of a foreclosure sale, a lender, trustee, or substitute trustee may rescind the sale if:
- The statutory requirements for the sale were not satisfied;
- The default leading to the sale was cured before the sale;
- A receivership or dependent probate administration involving the property was pending at the time of sale;
- A condition specified in the conditions of sale prescribed by the trustee or substitute trustee before the sale and made available in writing to prospective bidders at the sale was not met;
- The lender or mortgage servicer and the borrower agreed before the sale to cancel the sale based on an enforceable written agreement by the borrower to cure the default; or
- At the time of the sale, a court-ordered or automatic stay of the sale imposed in a bankruptcy case filed by a person with an interest in the property was in effect.
On or before the 15th calendar day after the date of the sale, the party rescinding the sale must:
- Serve a written notice of rescission that describes the reason for the rescission and includes recording information for any affected trustee’s or substitute trustee’s deed that was recorded on:
- The purchaser, if the lender is not the purchaser; and
- Each borrower who, according to the records of the mortgage servicer of the debt, is obligated to pay the debt; and
- File each notice for recording in the real property records of the county in which all or a part of the property is located.
A required notice must be served by certified mail. Service of the notice is complete when the notice is deposited in the United States mail, postage prepaid and addressed to the purchaser or borrower, as applicable, at the purchaser’s or borrower’s last known address, as applicable. The affidavit of a person knowledgeable of the facts to the effect that service was completed is prima facie evidence of service.
Not later than the fifth calendar day after the date a foreclosure sale is rescinded, the lender must return to the purchaser by certified mail, electronic or wire transfer, or courier service with delivery tracking the amount of the bid paid by the purchaser for the property at the sale. The borrower must return to the trustee the amount of any excess proceeds received by the borrower from the sale. The return of the bid amount is considered made on the date:
- The bid amount is deposited postage prepaid in the United States mail or with the courier service addressed to the purchaser at the purchaser’s last known address; or
- The electronic or wire transfer is ordered.
The rescinding lender, trustee, or substitute trustee must cause to be filed for recording in the real property records of the county where the required notice was recorded an affidavit stating the date the bid amount was returned together with the certified mail, electronic or wire transfer, or courier service delivery tracking information.
An affidavit executed and filed as provided above is prima facie evidence of the return of the bid amount and of the authority of the maker of the affidavit. A bona fide purchaser, lender, or other person acquiring an interest in the property or an insurer of title is entitled to rely conclusively on the record of the filed affidavit and notice, and any subsequent purchaser in good faith and for value is entitled to bona fide purchaser protection.
The rescission of a foreclosure sale restores the lender and the borrower to their respective title, rights, and obligations under any instrument relating to the foreclosed property that existed immediately prior to the sale.
A rescission of a foreclosure sale is void as to a lender or to a subsequent purchaser for a valuable consideration without notice unless notice of the rescission has been acknowledged, sworn to, or proved and filed for recording as required by law. A rescission of a foreclosure sale evidenced by an unrecorded instrument is binding on a party to the instrument, on the party’s heirs, and on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument.
An action challenging the effectiveness of a rescission may not be commenced unless the action is filed on or before the 30th calendar day after the date the required notices of rescission are filed for recording. A lis pendens notice based on the rescission not recorded within that period has no effect. This does not affect the limitations period for an action claiming damages resulting from the rescission.
If the foreclosure sale is rescinded for a reason listed above other than a court-ordered or automatic stay, the court in a civil action filed by the purchaser challenging the effectiveness of the rescission or claiming damages resulting from the rescission may only award as damages to the purchaser the amount of the bid paid for the property by the purchaser at the sale that has not been refunded to the purchaser, plus interest on that amount at the rate of 10 percent per year. Notwithstanding any other law, the court may not order specific performance of the sale as a remedy for the purchaser. Interest awarded ceases to accrue on the fourth day after the date the lender deposits the amount of the damages awarded in the United States mail or with a courier for delivery to the purchaser.
If a foreclosure sale is rescinded due to a court-ordered or automatic stay, the court in a civil action filed by the purchaser challenging the effectiveness of the rescission or claiming damages resulting from the rescission may only award as damages to the purchaser the amount of the bid paid for the property by the purchaser at the sale that has not been refunded to the purchaser.
The rescission of a sale by agreement of the affected parties on other terms or a suit to rescind a sale not rescinded for a reason indicated above is still permitted.
TEXAS HOUSE BILL 2063
Unless otherwise prohibited, the following documents received by the county clerk in the manner provided will be recorded by the clerk and serve as notice of the matter document:
- An instrument appointing or authorizing a trustee or substitute trustee to exercise the power of sale in a security instrument;
- A notice of sale pursuant to which the sale under a power of sale occurred;
- A notice of default on which the sale evidenced by a deed conveying title from a trustee or substitute trustee to a purchaser occurred;
- Documentation from the United States Department of Defense indicating that a borrower was not on active duty military service on the date of a foreclosure sale;
- A statement of facts regarding a foreclosure sale prepared by an attorney representing the trustee, substitute trustee, or mortgage servicer; or
- Proof of service of the mailing of any notice related to a foreclosure sale.
A document described above will be accepted for recording if it is attached as an exhibit to:
- A deed that conveys title from a trustee or substitute trustee to a purchaser at a foreclosure sale and that meets the requirements for recording; or
- An affidavit of a trustee or substitute trustee that meets the requirements for recording and relates to a foreclosure sale.
This provision does not prevent the recording of documents in any other manner allowed by law.
The appointment or authorization of a trustee or substitute trustee made in a notice of sale is effective as of the date of the notice if the notice:
- Complies with the requirements for the sale of real property under contract lien;
- Is signed by an attorney or agent of the mortgagee or mortgage servicer; and
- Contains a statement in all capital letters, boldface type, to read as follows:
THIS INSTRUMENT APPOINTS THE SUBSTITUTE TRUSTEE(S) IDENTIFIED TO SELL THE PROPERTY DESCRIBED IN THE SECURITY INSTRUMENT IDENTIFIED IN THIS NOTICE OF SALE. THE PERSON SIGNING THIS NOTICE IS THE ATTORNEY OR AUTHORIZED AGENT OF THE MORTGAGEE OR MORTGAGE SERVICER.
TEXAS HOUSE BILL 2067
If the maturity date of a series of notes or obligations or a note or obligation payable in installments is accelerated, and the accelerated maturity date is rescinded or waived as provided before the limitations period expires, the acceleration is deemed rescinded and waived and the note, obligation, or series of notes or obligations will be governed by the laws regarding lien requirements as if no acceleration had occurred.
Rescission or waiver of acceleration is effective if made by a written notice of a rescission or waiver served by the lender, the servicer of the debt, or an attorney representing the lender on each borrower who, according to the records of the lender or the servicer of the debt, is obligated to pay the debt.
Service of a notice must be by first class or certified mail and is complete when the notice is deposited in the United States mail, postage prepaid and addressed to the borrower at the borrower’s last known address. The affidavit of a person knowledgeable of the facts to the effect that service was completed is prima facie evidence of service.
A notice does not affect a lender’s right to accelerate the maturity date of the debt in the future nor does it waive past defaults.
This does not create an exclusive method for waiver and rescission of acceleration or affect the accrual of a cause of action and the running of the related limitations period on any subsequent maturity date, accelerated or otherwise, of the note or obligation or series of notes or obligations.