1 Until 2013, property tax loan liens were also to use this - PDF document

NON-JUDICIAL FORECLOSURES OF HOME EQUITY (“HEL”), AND PROPERTY OWNERS ASSOCIATIONS LIENS 1

 Until 2013, property tax loan liens were also to use this procedure, but Tax Code Sec. 32.06 was amended that year, and despite references in TRCP 735-6, property tax loan liens are not to be foreclosed in this fashion –property tax lien suit for those. Concepts Applicable to Most Mortgages  Debt/Note  Obligation to pay –typically installments  The right to pay installments is valuable and can only be terminated after notice and opportunity to cure (acceleration of installments)  Deed of Trust  Trustee named to sell  Lien to make sure the note is paid  Pay note, keep insured, keep taxes paid  Provides for non-judicial sale - typical deed of trust can be foreclosed on without judicial action (HEL - special procedures) 2

On home equity (reverse mortgage/HELLOC), we are dealing • with homestead and homestead only Rural 100 acres/200 acres (parcels) • Urban – contiguous 10 acres • Not identical concept as property tax homestead • Constitutionally protected from claims of creditors • Originally taxes, purchase money, or improvements • Now there can be home equity and tax loans • HOA assessments an exception too •  Homeowner assessments – subdivisions with their assessments for maintenance, etc.  Typically set out in the declarations/restrictive covenants.  Monthly or annual.  Section 209.0092 of the Property Code  Must there be a power of sale required under declaration? Rules suggest so. 3

Normal purchase money and improvement loans against even a homestead do not require a court order prior to proceeding non-judicially. Home equity loans and HOA assessment Liens do…and that is where you come in. But this is not a foreclosure itself. 4

 Balancing of interests between the lenders who want to make the loans, and the consumer protection folks who see HEL’s as a way to take away someone’s homestead  Makes for complexity, hurdles, and tripwires. Complex and Detailed  (A) is secured by a voluntary lien on the homestead created under a written agreement with the consent of each owner and each owner's spouse; (B) is of a principal amount that when added to the aggregate total of the outstanding principal balances of all other  indebtedness secured by valid encumbrances of record against the homestead does not exceed 80 percent of the fair market value of the homestead on the date the extension of credit is made; (C) is without recourse for personal liability against each owner and the spouse of each owner, unless the owner or spouse  obtained the extension of credit by actual fraud; (D) is secured by a lien that may be foreclosed upon only by a court order;  (E) does not require the owner or the owner's spouse to pay, in addition to any interest, fees to any person that are necessary  to originate, evaluate, maintain, record, insure, or service the extension of credit that exceed, in the aggregate, three percent of the original principal amount of the extension of credit; (F) is not a form of open-end account that may be debited from time to time or under which credit may be extended from  time to time unless the open-end account is a home equity line of credit; (G) is payable in advance without penalty or other charge;  (H) is not secured by any additional real or personal property other than the homestead;  (I) is not secured by homestead property that on the date of closing is designated for agricultural use as provided by statutes  governing property tax, unless such homestead property is used primarily for the production of milk; (J) may not be accelerated because of a decrease in the market value of the homestead or because of the owner's default under  other indebtedness not secured by a prior valid encumbrance against the homestead; … and on and on (as well as RESPA/TILA, etc.)  5

 120 days minimum since default  30 days notice under FDCPA  At least 20 days notice and opportunity to cure  Notice of Intent to Accelerate  Notice of Acceleration  Even then -- often rights to reinstate 6

Order authorizing me to keep going (to a non- judicial sale) How? By filing application for order. 7

 Applies to two general types of debt:  Home Equity/Reverse Mortgage/HELLOC  Home Owners Associations Assessment Liens under Property Code §209.0092  Unusual  Limited issue: Is the lien holder entitled to an order to proceed to foreclosure?  Not a judicial foreclosure, nor a substitute for judgment of judicial foreclosure.  Where – county where all or part of land located (or in probate court with jurisdiction over proceedings involving the property). Former rules required district court where property located, now includes probate court and drops “district court” requirement. Not sure of the rationale/intent.  When? After opportunity to cure provided (typically post acceleration)  Style itself is odd: “In re: Order for Foreclosure Concerning (mailing address of property) under Tex. R. Civ. P. 736” 8

Identify by name and last known address:   Petitioner  Respondent (HEL each obligor and mortgagor; HOA – each person obligated who has current ownership) Identify the property by commonly known street address and legal  description. Describe too:   Type of lien, e.g. home equity, HOA  Authority of person seeking order, lender, HOA  Each person obligated (and mortgagor, if different)  Defaults “If applicable” total payoff   Notices have been given and other required action taken and time for cure run Conspicuously state also:   Legal action is not being sought against non-obligated occupant  If applicant gets order, he is going to foreclose Include a summary judgment quality affidavit from petitioner describing  basis for foreclosure and attaching copies of note, lien and notices, with proof of mailing (and for tax liens property owner’s sworn statement and tax district’s certified statement attesting to transfer of lien) 9

736.3  The clerk issues and serves  Form available  at:http://www.txcourts.gov/media/847145/expedited- foreclosure-forms-for-website.pdf To whom?   Each named respondent, and  “Occupant” Must recite that response due first Monday after 38 days  from clerk’s mailing 10

736.3 cont’d.  You must serve:   First class certified and regular first class BOTH.  Respondents to their respective addresses in application  Occupant to property address. You must concurrently, complete return of service per TRCP  107, but return receipt need not be attached You must charge only one fee per addressee  Served upon mailing  736.5  Response may be by general denial and is due Monday next after  38 days but must include affirmative pleadings of:  Why respondent believes a respondent did not sign a specifically identified document  Why respondent is not obligated to pay  Why payment obligations are incorrect  Why documents attached are not what they claim  Proof of payment Any other assertions and claims are to be stricken without hearing  – no independent claims for relief 11

No discovery (736.4)  Limited issue (735.2)  No hearing unless response filed, and Petition should not be  required to appear at a hearing. (736.6-7) If response filed and hearing to be held, must be after reasonable  notice and must be held no less than 20 and no more than 30 days after a party’s request for hearing (736.6) At hearing petitioner has burden to prove by affidavits or  evidence the grounds for relief – entitled to foreclose. If no timely response, petitioner  may file motion and proposed default order (736.7(a)) Court must grant within 30 days  after the motion for default is filed if application complies and service proper (736.7(b)) Return must be on file 10 days.  (736.7(c)) Petition need not appear to get an  default order. (736.6-7) 12

Must Describe (736.8)   Material facts serving as basis for relief  Property to be foreclosed on  Named and LKMA of respondents  Recording information of lien to be foreclosed No MNT, appeal, etc. (736.8(c))  Decides nothing other than that we can continue –without  prejudice and not res judicata for squata. (736.9) Form also available at  http://www.txcourts.gov/media/847145/expedited-foreclosure- forms-for-website.pdf These Rules have their own mini-automatic stay provision, similar • to Sec. 362 in Bankruptcy. (736.11) Proceedings automatically stayed if respondent files in a competent • court with jurisdiction a separate proceeding putting in issue the origination, serving, or enforcement of the lien. Other proceeding must be filed before 5:00 p.m. on Monday before • a sale. (736.11(a)) If stay invoked, proceeding shall be dismissed (pre-order); and if • order entered already, must be vacated. (736.11(c)). Stays not only the 735 proceedings, but the order as well, and a sale • in violation of the stay is void. (736.11(d)) 13

 At Texas Supreme Court website:  http://www.txcourts.gov/media/847145/expedited -foreclosure-forms-for-website.pdf 14