By Grusendorf H.B. No. 2834
77R6974 AJA-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to foreclosure of certain liens on real property.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 51, Property Code, is amended by adding
1-5 Section 51.0011 to read as follows:
1-6 Sec. 51.0011. DEFINITIONS. In this chapter:
1-7 (1) "Debt" means a right to payment regardless of
1-8 whether the right is liquidated, unliquidated, fixed, contingent,
1-9 matured, unmatured, disputed, undisputed, legal, equitable,
1-10 secured, or unsecured.
1-11 (2) "Debtor" means the person obligated for the debt.
1-12 (3) "Excess proceeds" means surplus funds generated by
1-13 a public sale that remain after payment of the debt, trustee fees,
1-14 and expenses secured by property sold at the public sale.
1-15 (4) "Last known address" means the mortgagor's or
1-16 debtor's mailing address provided in writing to the mortgagee on or
1-17 before the 30th day before the date the mortgagee sends any notice
1-18 required by this chapter or by the loan agreement.
1-19 (5) "Loan agreement" means one or more promises,
1-20 promissory notes, agreements, undertakings, security agreements,
1-21 mortgages, deeds of trusts or other documents, or commitments, or
1-22 any combination of those actions or documents, under which a person
1-23 loans or delays repayment of or agrees to loan or delay repayment
1-24 of money, goods, or any other thing of value or otherwise extends
2-1 credit or makes a financial accommodation.
2-2 (6) "Mortgage" means a deed of trust, security
2-3 instrument, or other contract lien on an interest in real property
2-4 that is enforceable regardless of whether a person is personally
2-5 liable for its performance.
2-6 (7) "Mortgagee" means:
2-7 (A) the grantee or beneficiary of a mortgage;
2-8 (B) if a mortgage has been assigned of record,
2-9 the last person to whom the mortgage has been assigned of record;
2-10 (C) if a mortgage is serviced by a mortgage
2-11 servicer, the mortgage servicer; or
2-12 (D) the owner or holder of the debt.
2-13 (8) "Mortgage servicer" means the last person to whom
2-14 a mortgagor has been instructed by a mortgagee to send payments for
2-15 the loan secured by a mortgage.
2-16 (9) "Mortgagor" means the grantor of a mortgage,
2-17 unless released, and any person who subsequently assumes the
2-18 mortgage obligation.
2-19 (10) "Obligor" means a person who, with respect to an
2-20 obligation created by a mortgage, owes payment or other performance
2-21 of the obligation or is accountable in whole or in part for payment
2-22 or other performance of the obligation.
2-23 (11) "Payoff" or "payoff statement" means a statement
2-24 of the amount of:
2-25 (A) the unpaid balance of the loan secured by a
2-26 mortgage, including principal, interest, and other charges properly
2-27 assessed under the loan documentation of the mortgage; and
3-1 (B) interest on a per diem basis for the unpaid
3-2 balance.
3-3 SECTION 2. The heading to Section 51.002, Property Code, is
3-4 amended to read as follows:
3-5 Sec. 51.002. SALE OF REAL PROPERTY UNDER MORTGAGE [CONTRACT
3-6 LIEN].
3-7 SECTION 3. Sections 51.002(a), (b), and (d)-(f), Property
3-8 Code, are amended to read as follows:
3-9 (a) A sale of real property under a power of sale conferred
3-10 by a mortgage [deed of trust or other contract lien] must be a
3-11 public sale at auction held between 10 a.m. and 4 p.m. of the first
3-12 Tuesday of a month. The sale must take place at the county
3-13 courthouse in the county in which the land is located, or if the
3-14 property is located in more than one county, the sale may be made
3-15 at the courthouse in any county in which the property is located.
3-16 The commissioners court shall designate the area at the courthouse
3-17 where the sales are to take place and shall record the designation
3-18 in the real property records of the county. The sale must occur in
3-19 the designated area. If no area is designated by the commissioners
3-20 court, the notice of sale must designate the area at the courthouse
3-21 where the sale covered by that notice is to take place, and the
3-22 sale must occur in that area.
3-23 (b) Notice of the sale[, which] must:
3-24 (1) contain the name and street address of each
3-25 trustee;
3-26 (2) include a statement of the earliest time at which
3-27 the sale will begin; and
4-1 (3) [, must] be given at least 21 days before the date
4-2 of the sale:
4-3 (A) [(1)] by posting at the courthouse door of
4-4 each county in which the property is located or posting on an
4-5 Internet website prominently described in each notice filed under
4-6 Paragraph (B) or served under Paragraph (C) a written notice
4-7 designating the county in which the property will be sold;
4-8 (B) [(2)] by filing in the office of the county
4-9 clerk of each county in which the property is located a copy of the
4-10 notice posted under Paragraph (A) [Subdivision (1)]; and
4-11 (C) [(3)] by the mortgagee [holder of the debt]
4-12 to which the power of sale is related serving written notice of the
4-13 sale by certified mail on each debtor who, according to the records
4-14 of the mortgagee [holder of the debt], is obligated to pay the
4-15 debt.
4-16 (d) Notwithstanding any agreement to the contrary, the
4-17 mortgagee [holder of the debt] shall serve a debtor in default
4-18 under a mortgage [deed of trust or other contract lien] on real
4-19 property used as the debtor's residence with written notice by
4-20 certified mail stating that the debtor is in default under the
4-21 mortgage [deed of trust or other contract lien] and giving the
4-22 debtor at least 20 days to cure the default before notice of sale
4-23 can be given under Subsection (b). The entire calendar day on
4-24 which the notice required by this subsection is given, regardless
4-25 of the time of day at which the notice is given, is included in
4-26 computing the 20-day notice period required by this subsection, and
4-27 the entire calendar day on which notice of sale is given under
5-1 Subsection (b) is excluded in computing the 20-day notice period.
5-2 (e) Service of a notice under this section by certified mail
5-3 is complete when the notice is deposited in the United States mail,
5-4 postage prepaid and addressed to the debtor at the debtor's last
5-5 known address as shown by the records of the mortgagee [holder of
5-6 the debt]. The affidavit of a person knowledgeable of the facts to
5-7 the effect that service was completed is prima facie evidence of
5-8 service.
5-9 (f) Each county clerk shall keep all notices filed under
5-10 [Subdivision (2) of] Subsection (b)(3)(B) [(b)] in a convenient
5-11 file that is available to the public for examination during normal
5-12 business hours. The clerk may dispose of the notices after the
5-13 date of sale specified in the notice has passed. The clerk shall
5-14 receive a fee of $2 for each notice filed.
5-15 SECTION 4. The heading to Section 51.007, Property Code, is
5-16 amended to read as follows:
5-17 Sec. 51.007. TRUSTEE NAMED IN SUIT OR PROCEEDING [UNDER DEED
5-18 OF TRUST, CONTRACT LIEN OR SECURITY INSTRUMENT].
5-19 SECTION 5. Sections 51.007(a) and (f), Property Code, are
5-20 amended to read as follows:
5-21 (a) The trustee named in a suit or proceeding may plead in
5-22 the answer that the trustee is not a necessary party by a verified
5-23 denial stating the basis for the trustee's reasonable belief that
5-24 the trustee was named as a party solely in the capacity as a
5-25 trustee under a mortgage [deed of trust, contract lien, or security
5-26 instrument].
5-27 (f) A trustee is [shall] not [be] liable to any person for
6-1 damages, including attorney's fees, arising from [for] any good
6-2 faith error resulting from reliance on any information in law or
6-3 fact provided by the mortgagor or mortgagee or their respective
6-4 attorney, agent, or representative or other third party. A trustee
6-5 is subject to Section 27.01, Business & Commerce Code, relating to
6-6 liability for false representations and false promises made in a
6-7 real estate transaction.
6-8 SECTION 6. Chapter 51, Property Code, is amended by adding
6-9 Sections 51.008 and 51.009 to read as follows:
6-10 Sec. 51.008. DUTIES OF TRUSTEE UNDER MORTGAGE. (a) A
6-11 trustee's responsibilities under a mortgage are incidental to the
6-12 trustee's fiduciary duties.
6-13 (b) The mortgagee may appoint one or more trustees and
6-14 substitute trustees in a mortgage instrument by corporate
6-15 resolution or by a durable power of attorney that conforms to
6-16 Sections 482(1), (2), and (4), Probate Code. In the absence of
6-17 actual or constructive notice to the contrary, an appointment of a
6-18 trustee is valid. Except for conducting a public sale at auction,
6-19 a trustee's ministerial duties may be delegated to another person.
6-20 (c) Property sold at a public sale is sold "as is," without
6-21 any implied warranties of the nature or physical condition of the
6-22 property or the legal or equitable nature of any encumbrances or
6-23 clouds on the title affecting the property. A purchaser at a
6-24 public sale is not a bona fide purchaser and acquires the property
6-25 at the purchaser's risk.
6-26 (d) Not later than the 10th business day after the date
6-27 property is sold at a public sale, any person with a legal or
7-1 equitable interest in the foreclosed property may serve a sworn
7-2 statement describing facts that may affect the validity of the
7-3 sale, including bankruptcy or probate proceedings, unresolved
7-4 intestacy matters, an Internal Revenue Service or ad valorem tax
7-5 lien, title problems, reinstatement rights, foreclosure
7-6 precondition failures, or any other matter affecting the validity
7-7 of the sale. The statement must be sent by certified mail,
7-8 restricted delivery, to the trustee at the trustee's street
7-9 address, as reflected in the notice of sale.
7-10 (e) Not later than the 10th business day after the date the
7-11 trustee receives a statement under Subsection (d), the trustee may
7-12 rescind the foreclosure of the property under the public sale by
7-13 mailing a notice by certified and regular mail to the last known
7-14 address of the debtor and the public sale purchaser and by filing
7-15 an affidavit in the real property records of the county in which
7-16 the property was foreclosed stating that the acceleration of the
7-17 maturity of the debt and public sale are rescinded. A properly
7-18 filed affidavit constitutes public notice that the loan agreement,
7-19 the debt, and the mortgage instrument have been reinstated
7-20 according to terms existing immediately before the public sale.
7-21 (f) After rescission of a public sale under Subsection (e),
7-22 a cash purchaser of the property is entitled to the return of the
7-23 sales price plus interest on the sales price calculated at the
7-24 legal interest rate accrued from the date of sale until the date on
7-25 which notice under Subsection (e) is mailed to the purchaser.
7-26 After the notice is mailed, the mortgagee, trustee, and the
7-27 mortgagee's or trustee's attorney, agent, and successors or assigns
8-1 are relieved from liability to the purchaser or the purchaser's
8-2 grantees or assigns for any incidental or consequential damages,
8-3 including attorney's fees, incurred or that may be incurred as a
8-4 result of the public sale.
8-5 (g) Unless otherwise stated in the mortgage instrument, a
8-6 trustee is entitled to a fee of not less than five percent of the
8-7 price received for the property at the public sale.
8-8 (h) If a legal proceeding challenging the foreclosure
8-9 proceedings or public sale is not filed on or before the 120th day
8-10 after the date of the public sale and the trustee holds excess
8-11 proceeds, the trustee shall send written notice by certified and
8-12 regular mail to each inferior lien holder, as reflected in the real
8-13 property records of the county in which the mortgage was recorded,
8-14 stating that the lien holder may file a sworn claim with the
8-15 trustee on or before the 30th day after the date the notice is
8-16 mailed. If the address of an inferior lien holder is not reflected
8-17 in the mortgagee's records, the notice shall be sent to the last
8-18 known address reflected in the security instrument filed in the
8-19 real property records in which the property giving rise to the
8-20 claim is located. If there is no inferior lien holder, the notice
8-21 shall be mailed to the last known address of the debtor.
8-22 (i) Any person with a claim to excess proceeds must file a
8-23 sworn claim with the trustee.
8-24 (j) On payment of a sworn claim or interpleading of the
8-25 excess proceeds into the registry of a district court in the county
8-26 in which the property was sold at a public sale, the trustee is
8-27 relieved from all liability to any person for damages incurred or
9-1 that might be incurred by that person to the extent of any excess
9-2 proceeds paid in good faith to any person filing a sworn claim or
9-3 for any funds interplead into the registry of the court.
9-4 (k) If an interpleader action is filed, the clerk of the
9-5 court is entitled to a reasonable administrative fee for holding
9-6 the interplead funds, and the trustee is entitled to reasonable
9-7 attorney's fees and all costs of court.
9-8 (l) Excess proceeds are presumed abandoned if the proceeds
9-9 are not distributed on or before the third anniversary of the date
9-10 the notice required by Subsection (h) is mailed.
9-11 (m) A trustee holding abandoned excess proceeds on June 30
9-12 shall file a report on or before the following November 1 with the
9-13 comptroller in accordance with Subchapter B, Chapter 74, and
9-14 deliver the excess proceeds to the comptroller in accordance with
9-15 Subchapter D, Chapter 74. Delivery under this subsection relieves
9-16 the trustee from all liability to all persons.
9-17 Sec. 51.009. POSSESSION OF PROPERTY AFTER NONJUDICIAL
9-18 FORECLOSURE SALE. (a) If after a public sale, an obligor of the
9-19 mortgage or an occupant of the property sold at a public sale files
9-20 suit in a court of the county in which the foreclosed property is
9-21 located and continues to occupy or retain control of the foreclosed
9-22 property, that person shall pay each month into the registry of the
9-23 court an amount equal to the monthly mortgage payment until the
9-24 person vacates or surrenders the property.
9-25 (b) Each payment required under Subsection (a) shall be paid
9-26 to the district clerk in the county in which the property was
9-27 foreclosed. The district clerk shall account for the money in the
10-1 same manner as for child support payments and is entitled to a
10-2 reasonable administrative fee.
10-3 (c) The mortgagee is entitled to an immediate writ of
10-4 possession from the court if:
10-5 (1) an obligor or occupant fails to pay the amounts
10-6 required by Subsection (a); and
10-7 (2) the default is not cured on or before the 30th day
10-8 after the date a notice is filed with the court advising the
10-9 obligor or occupant to cure the default.
10-10 (d) After all legal or equitable proceedings concerning
10-11 title or possession of the foreclosed property are final, the court
10-12 shall order the amounts held by the district clerk under Subsection
10-13 (b) to be paid in a manner that prevents unjust enrichment.
10-14 (e) This section does not prevent an obligor or occupant
10-15 from filing an action challenging the foreclosure proceedings or
10-16 the public sale.
10-17 SECTION 7. (a) This Act takes effect September 1, 2001.
10-18 (b) The changes in law made by this Act apply only to the
10-19 foreclosure of a lien that occurs on or after the effective date of
10-20 this Act. The foreclosure of a lien that occurs before the
10-21 effective date of this Act is governed by the law in effect
10-22 immediately before the effective date of this Act, and that law is
10-23 continued in effect for that purpose.