Texas Commercial Law Firm

As a general rule, we strongly recommend that a new N.O.I. be provided to the borrower when payments are accepted and applied by the lender after a loan has been accelerated. This is because in the absence of a written agreement between the parties, application of payments may create the appearance that the loan has been reinstated. In the event a forbearance arrangement is intended, then we strongly recommend the use of a written agreement which clearly states that the loan has not been reinstated and that the loan will remain in an accelerated state during the term of forbearance notwithstanding that payments will be made and applied. Even though the circumstances (i.e. oral agreements, notes in the file, course of dealing between the parties) indicate that a loan has not reinstated, absent a properly drafted forbearance agreement executed by the parties, there is a very real possibility that a fact finder may conclude that the loan had reinstated because, as discussed below, fact issues tend to be resolved in favor of the borrower in foreclosure litigation.

Texas Courts have historically taken the view that non-judicial foreclosure procedure in Texas is swift in process and harsh in result, particularly when it involves consumer borrowers, (e.g. loss of a home with no right of redemption). One reason is that jurors naturally tend to identify more with consumers than with lending institutions. Another reason is that the lender is typically well-represented throughout the foreclosure process while the consumer, on the other hand, is rarely represented. Lenders may be seen by juries, therefore, as having an unfair advantage and any action or failure to act that works to the disadvantage of the consumer will not be well-received by the jury, especially if they perceive that such action would have benefitted the consumer at little cost to the lender.

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