Texas Commercial Law Firm

A number of profound changes to the Texas Property Code, relating specifically to foreclosure procedures became effective January 1, 2004. Several of the most significant changes, though perhaps well intentioned, are somewhat confusing and may result in delayed foreclosures in some cases. These ambiguous and confusing provisions may open the door to litigation challenging the validity of foreclosures for technical violations of requirements placed on mortgage servicers. Investors may bear the unpleasant burden of increased contact from defaulted borrowers as a result of new disclosure requirements.

Fortunately, some of the changes discussed below are beneficial though many years overdue. For example, specifying that a purchaser at a foreclosure sale is not a "consumer" is a change needed for many years. This article addresses the Texas foreclosure revisions beginning with those which are most likely to impact servicers' and investors' procedures and time-lines significantly.

1. A Mortgage Servicer must disclose its relationship with the Mortgagee.

Foreclosure procedures were changed significantly by the addition of Section 51.0025 to the Texas Property Code:

A mortgage servicer may administer the foreclosure of property under Section 51.002 on behalf of a mortgagee if:

(1) the mortgage servicer and the mortgagee have entered into an agreement granting the current mortgage servicer authority to service the mortgage; and
(2) the mortgage servicer discloses in the notice required under Section 51.002:

(A) that the mortgage servicer is representing the mortgagee under a servicing agreement with the mortgagee; and
(B) the name and address of the mortgagee.

[Emphasis added] Texas Legislature HB 1493, Property Code Sec. 51.0025 (2004)

Among the more significant changes brought by Section 51.0025 is the requirement of a mortgage servicer to disclose to the borrower its relationship to the holder of the loan, (the “Disclosure”). The mortgage servicer is now required to disclose to the borrower that it is representing the mortgagee and to include the name and address of the mortgagee in any notices sent to mortgagors under Property Code Section 51.002.

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