Foreclosure is one of the most stressful situations a homeowner can go through. Fortunately, homeowners have rights in foreclosure cases, and a skilled Fort Worth foreclosure attorney can sometimes even stop foreclosure. One important protection is the One Action Rule. This leaves many asking, “What is the One Action Rule for foreclosure?”
When a person buys property, such as real estate, with a loan, they sign a contract agreeing to repay the lender according to the outlined terms. The contract also stipulates that the lender has the right to take the property back if the person defaults on the loan or fails to make their payments as agreed. Foreclosure is the legal process a lender uses to take back and sell property to pay off a secured loan when the borrower defaults.
Texas allows two types of foreclosure, and they each have their own legal process that must be followed.
The lender has to get a judgment from the court before they can foreclose. This is rare in Texas, and it is usually used in cases dealing with home equity loans, tax issues, or reverse mortgages. The process for this type of foreclosure is similar to other civil cases. The lender files paperwork with the court, and the borrower receives a copy to allow them to defend themselves against the action.
Also called a power of sale foreclosure. This is the most common kind of foreclosure, wherein the borrower and lender do not have to go to court. The lender has to give the person notice that they plan to take action, and the person has at least 20 days to pay what they owe or work out another arrangement with the lender. If the borrower doesn’t resolve the problem, the lender can then sell the property and must send a notice to the borrower saying so.
Sometimes, the rules regarding foreclosure in Texas are different for different kinds of properties or situations. For example, commercial borrowers may have to deal with more complex issues if they have tenants. In most cases, though, a borrower has certain rights in the foreclosure process. These include:
An important protection for borrowers is the One Action Rule. This can apply when a borrower defaults on a loan secured by real property (like a home). In these cases, the lender can’t take the borrower to court for their debt until after they have gone through the foreclosure process and sold the property to recover what the borrower owes. Only once that is complete can the lender file a legal claim against the borrower for any remaining debt not covered by the property’s sale.
In short, a lender can’t take a borrower to court for debt and foreclose at the same time. This protects a person from being held liable for the loan before the property is sold, and it prevents the lender from having the loan repaid while also still taking back and selling the property.
There are several regulations in place that give homeowners several options for foreclosure. For example, you do not have to try to stop a foreclosure. You can do nothing and let the lender foreclose. However, not everyone even realizes it is only one option. Other methods that may allow you to keep your home include:
A: The One Action Rule works by requiring lenders to take back and sell the property to cover the defaulted loan before they can file with the court to make the borrower repay the remainder of the debt. This keeps the borrower from having to deal with multiple legal actions at once for the same debt and also protects them from having all their assets seized at one time for the same debt.
A: The first legal action for foreclosure depends on which kind of foreclosure is being used. For a judicial foreclosure, the first legal action is filing the petition with the court to initiate the foreclosure process. For a non-judicial foreclosure, which is the more common kind, the first legal action is sending a notice to the borrower of the intent to start foreclosure. In either case, the borrower then has a period of time to respond.
A: The 37-Day Foreclosure Rule is a federal law. Under this rule, if a homeowner applies for loss mitigation with their mortgage company at least 37 days before the foreclosure sale, the mortgage company is required to pause the foreclosure, review the application, and give consideration to all possible options before they can actually sell the property. This gives the homeowner options and time to work out a way to resolve the problems, rather than having no choice in the foreclosure.
A: In Texas, foreclosures work similarly to other states. Not all states allow both judicial and non-judicial foreclosures. For example, some states require that all foreclosures go through the courts. Some states also have a redemption period where the borrower can buy back the property after it’s sold at foreclosure, but Texas is not one of those states.
At Steele Law Firm, PLLC, our top priority is to find solutions that work for you and to achieve your desired results, whether that means bankruptcy, loss mitigation, or other avenues. Contact our office right away to learn your legal options and get the foreclosure help you need.
