Any foreclosure process begins with a review of the note and deed of trust to determine whether a default has occurred. Before a single notice goes out and before a substitute trustee is appointed, we need to know exactly what the documents say, because the documents control everything.
Skipping this step, or treating it as a formality, is one of the most common causes of foreclosures that have to be restarted from the beginning.
What Counts as Default
The most obvious act of default is a violation of the note’s repayment terms: the borrower stops making payments. But payment default is not the only kind. Most Texas deeds of trust also treat the following as independent events of default.
Failure to Pay Property Taxes
Texas deeds of trust almost universally require the borrower to pay all ad valorem property taxes when due. Unpaid taxes create a lien on the property senior to yours, so this is a default lenders have a strong interest in addressing promptly.
Failure to Maintain Insurance
If the borrower has allowed the hazard insurance to lapse, that is typically a separate event of default under the deed of trust, even if note payments are current.
Waste and Deterioration
Deliberate or negligent acts that reduce the property’s value, such as stripping fixtures, abandoning the property, or allowing serious deterioration, can constitute default under many deed-of-trust provisions.
Unauthorized Transfer: The Due-on-Sale Clause
Most institutional deeds of trust contain a due-on-sale clause. If the borrower has transferred the property without the lender’s consent, that transfer is typically an independent default allowing immediate acceleration.
What We Review Before Accelerating
Before any acceleration is declared, the note must be reviewed for two things.
First, cure periods and pre-acceleration notice requirements. Some notes, particularly residential instruments, require the lender to give the borrower advance written notice and an opportunity to cure before the debt can be accelerated. If that provision exists and has not been contractually waived, it must be honored. Sending an acceleration notice before the cure period runs can invalidate the entire process and require starting over.
Second, whether the note has been modified. Any loan modification, forbearance agreement, or extension agreement must be reviewed alongside the original instruments. The default terms in a modification may differ entirely from the original note.
The Deed of Trust and the Trustee
The deed of trust is the document by which the mortgagor conveys the subject property in trust to a trustee named in that instrument. The trust is established for the benefit of the mortgagee, so that the mortgagee can exercise its foreclosure rights without resorting to a lawsuit.
The trustee named in the deed of trust is technically the individual who conducts the foreclosure process. In practice, though, the mortgagee almost always appoints a substitute trustee, usually the attorney handling the matter. The appointment and role of the substitute trustee is described in Step 2.
How Borrowers Give Up Their Rights
Once the foreclosure process begins, all communications with the borrower should flow through counsel. A lender who accepts a partial payment after declaring the debt accelerated, or who sends correspondence inconsistent with treating the full balance as due, can be found to have waived the acceleration. A waived acceleration means the entire process restarts from the beginning.
We coordinate all borrower communications once a matter is in our hands to prevent this.
What We Do in Step 1
When a client contacts us about a potential foreclosure, our first work is the document review. We obtain and read the note, deed of trust, and any modification agreements. We confirm the specific default and verify it falls within the deed of trust’s default provisions. We identify any cure periods or pre-acceleration notice requirements. We confirm the client is the current holder entitled to foreclose. And we provide a summary of the process and estimated timeline before any notices go out.
Only after this review is complete do we move to Step 2.
In this section: Step 1: Default · Step 2: Notice · Step 3: Lien Search · Step 4: Sale · Step 5: Cleaning Up
Frequently Asked Questions
Does a borrower have the right to cure a default before the sale?
It depends on the deed of trust. Texas statutes do not provide a general right to cure before a non-judicial sale. However, many deeds of trust, particularly residential instruments, contractually give the borrower a right to cure or reinstate before the sale proceeds. If that right exists in your documents, it must be honored.
Can I foreclose for failure to pay property taxes even when payments are current?
Yes, if the deed of trust lists tax default as an independent event of default, which most Texas commercial instruments do. We typically send a demand letter first, giving the borrower a short period to cure the tax default before initiating formal foreclosure proceedings. But the right to foreclose exists from the moment the default occurs.
What if the borrower disputes that a default occurred at all?
A borrower who disputes the default can seek a temporary restraining order from a Texas court before the sale date. The non-judicial process does not require the lender to litigate the question of default before proceeding, but a lender facing a real dispute should consult us before moving forward, as a colorable dispute creates litigation risk even when the lender is correct.
How do I know if the note has been modified without my knowledge?
This is an important question for note purchasers and assignees. When a loan is sold or assigned, the buyer takes it with whatever agreements the original lender made with the borrower. We do a thorough document review at the outset of every engagement and ask specific questions about any modifications, extensions, or forbearance arrangements before assuming the original note terms control.
What is the difference between acceleration and a demand for overdue payments?
Before acceleration, the lender can only demand the specific payments that are overdue, not the full balance. After acceleration, the entire remaining balance is declared immediately due. The foreclosure sale is conducted to satisfy that full accelerated balance. Acceleration is a threshold decision that we discuss with every client before taking any formal step.