SRC-JJJ S.B. 1742 76(R)   BILL ANALYSIS


Senate Research Center   S.B. 1742
By: Harris
Jurisprudence
4/16/1999
As Filed


DIGEST 

The Texas Property Code is currently silent as to the standing of the buyer
in a foreclosure sale. Case law has held that a foreclosure buyer bids at
his peril at a foreclosure sale and is not a good faith purchaser without
knowledge.  S.B. 1742 would establish provisions regarding certain
proceedings in a foreclosure action. 

PURPOSE

As proposed, S.B. 1742 establishes provisions regarding certain proceedings
in a foreclosure action. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 51.002, Property Code, to require a sale of real
property under a power of sale conferred by a deed of trust, security
instrument, or other contract lien to be a public sale at certain auctions.
Requires notice of sale by the mortgagee or its attorney, agent, or
representative serving written notice of foreclosure sale by certified mail
on each mortgagor who, according to the records of the holder of the
mortgagee, rather than debt, is obligated to pay the debt. Requires the
mortgagee or its representative to serve a mortgagor in default under the
terms of the note secured by a deed of trust, security instrument, or other
contract lien on real property used as the mortgagor's residence with
written notice by certified mail stating that the mortgagor is in default
and giving the debtor at least 20 days to cure the default before notice of
sale can be given.  Provides that service of a notice is complete when the
notice is addressed to the mortgagor at the property securing the debt,
unless the mortgagee has received within 20 days of foreclosure, a written
notice from the mortgagor  designating a different address for purposes of
notice under the terms of the security instrument.  Provides that one
notice may be mailed to all mortgagors residing in the same address.
Requires a foreclosure sale to be discounted, after acceleration of the
maturity of the debt, if at least five days before the scheduled sale date
the mortgagee receives certain sums and payments and the mortgagor cures
any other default.  Establishes conditions regarding cost after
acceleration. Provides that upon cure of a default, any prior acceleration
is canceled and the note and security instrument remain enforceable.
Establishes that the sale of any real property and improvements at a
foreclosure sale is "as is" without any implied representations or
warranties.  Provides that a purchaser obtains only such title as the
trustee had authority to convey and is not a good faith purchaser for value
without notice.  Requires the trustee to file within 60 days of receipt of
a notice of recission canceling the trustee's deed in the official  real
property records of the county where the property is located.  Authorizes a
mortgagee to appoint by power of attorney or resolution an individual
residing in or a law firm licensed in Texas to select one or more
substitute trustees for certain security instruments.  Requires the power
of attorney or resolution to include certain information on the mortgagee's
behalf.  Requires a notice of sale to include certain information regarding
the power of attorney or resolution and clerk's information.  Requires the
substitute trustee to be identified in the notice.  Deletes text regarding
holder of a debt to which power of sale is related; the inclusion of an
entire calendar day in the 20-day notice period computation for a notice;
and notice of sale.  Makes conforming changes. 

SECTION 2.  Amends Chapter 51, Property Code, by adding Section 51.007, as
follows: 
 
Sec. 51.007.  TRUSTEE UNDER SECURITY INSTRUMENT.   Authorizes a trustee
named in a suit or proceeding related to a foreclosure to file a verified
objection regarding the duties of the trustee.  Requires each party, within
21 days after the objection is filed, to file a verified response that sets
forth each party's factual basis for certain belief.  Requires the trustee,
if the objection is not properly or timely filed, to be dismissed as to
each nonresponding party's claim in the suit or proceeding and the trustee
shall not be subject to certain awards and costs.  Requires a hearing date
to be obtained by the trustee in the event a proper response to the
trustee's objection is filed.  Requires the court, based on a preponderance
of the evidence, to dismiss the trustee if the court determines the trustee
was named as a party solely in the capacity as trustee.  Requires a trustee
to incur no liability for any good faith error resulting from reliance on
any information provided by the mortgagor, mortgagee, or their respective
representatives. 

SECTION 3.  Effective date: September 1, 1999.
            Makes application of this Act prospective.

SECTION 4.  Emergency clause.