Texas Commercial Law Firm

C. Examining Title for Potential Problems

At the time the notice of default and right to cure are provided, or shortly thereafter, it is recommended that a title report be ordered. This should allow time to receive the report and review it prior to the deadline for sending notice of federal tax liens and prior to acceleration and posting notice of sale.

1. First lien. It is important to review title to determine if the lien sought to be foreclosed is in fact a first lien. In some cases, a prior lien may have been foreclosed and cut off the lien you seek to foreclose, making any attempts to foreclose wasted at best and possibly creating a cloud on title at worst. If you find that the lien you seek to foreclose is a junior lien, it is prudent to determine the outstanding balance secured by the senior lien and estimate the property's value to determine if there is sufficient equity in the property to justify the expense of foreclosure. It may be necessary to contact the first lienholder to determine if the first lien is also in default and if the lienholder plans to foreclose. If so, the mortgagee should be consulted to determine if they have the inclination or resources to purchase the first lien obligation or bring it current in order to protect their second lien position.

2. Probate. In the event a probate proceeding is noted in the title report, it is likely the foreclosure proceeding will need to be postponed until the property is determined to be outside of probate or the probate court has given permission to foreclose. (See §K.1. below for a detailed discussion concerning options for foreclosing when there is a deceased mortgagor.)

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