Who is Entitled to Notice of Default

Question: The mortgage is under my husband's name, the deed is under both of our names, the property is homestead, the lender foreclosed on a deed that only had hubby's name and not the current deed which was executed the same day of the loan and then deed back to me(us). Who is notified about a trustee sale -- both deed trustors or only the borrower?

Answer: Your question is who is entitled to notice in the event of a default on a mortgage, assuming a nonjudicial foreclosure under a deed of trust and not a judicial foreclosure in a court proceeding. The answer is everyone who is personally liable for payment of the debt. This includes the original maker, comaker, cosigner or guarantor of the note and subsequent assumptors of the debt.

As I understand, your husband bought a homestead and made a purchase money mortgage. All documents, including the deed, note and deed of trust, were solely in his name. At the same time, or immediately thereafter, he conveyed the property to the two of you by a separate deed. Unless that deed contained language that you assumed the indebtedness, or unless you became liable by some separate agreement, you were not personally liable for payment of the debt although the property was subject to the mortgage and possible foreclosure. In other words, you could lose the property but the lender could not sue you personally for any amount still owed on the debt.

The law of nonjudicial foreclosure is set out in Section 51.002 of the Texas Property Code. For foreclosure of a debtor's residence, the debtor is entitled to notice of default and opportunity to cure for a period of 20 days before the debt can be declared fully due and foreclosure proceedings commenced, paragraphs (d) and (e). If the default remains uncured, upon posting and notice of sale given for the 21 days prior to sale, (b)(3) provides that written notice by certified mail must be sent to each debtor who, according to the records of the mortgage servicer (the holder of the note or an agent acting on behalf of the holder), is obligated to pay the debt. This means that the mortgage servicer is not obligated to investigate outside its own records in determining debtor status. In your case, the servicer gave notice to your husband only at whatever address the servicer had for him, most probably at the residence itself, but not necessarily.

While this might be sufficient to satisfy the Code, in my view the best practice is to check the title to date and give notice to all present owners of record and obligors on the indebtedness, whether one and the same. If there is to be a challenge or dispute over a default, notice or foreclosure issue, it is best that it occur at the earliest possible time.

Can We Get Out of Contract?

Question: I have a client that is building a home on the 1-4 contract and the completion date was December 15, 2007 and is not completed yet. The brick work is also poorly done and now my client would like out of it. What are his options now?

Answer: Under the circumstances you describe, your client may have several available options depending upon how the contract is drafted. Since your question pertains to a specific written contract which is not before me, I will offer a few general guidelines that may apply to your situation.

The phrase "getting out of a contract" can mean everything from refusing to perform when performance is possible (known as a "breach") to those possibilities where the party, in this instance the Buyer, can declare the contract unfulfilled by the other party and legally avoid the consequences of non-performance. I believe you are interested in the latter possibility. From this point forward, references to a contract mean the promulgated TREC One to Four Family Residential Contract (Resale) available at the TREC website.

If construction must be completed by last December 15 and it is not, in absence of a written extension the contract becomes unenforceable on that date if it provides that "time is of the essence" for completion. "Time is of the essence" means that an event or condition happening by a specified time is part of the consideration for the contract. If the event or condition is not performed or met on time, the consideration then fails and the contract becomes void This is a special provision usually (but not necessarily) addressed in Paragraph 11. Special Provisions.

Paragraph 23. Termination Option. If the contract provides for a long option period and your client is within the time frame, the client can give notice and walk away with no loss but the option consideration.

Paragraph 4. Financing, and the separate Third Party Financing Condition Addendum. If the Buyer is unable to obtain third party financing through no fault of its own within the requisite time, that condition is not met and the contract becomes void unless the parties agree otherwise.

Paragraph 5. Earnest Money. If earnest money is held by the title company and is to be returned to the Buyer under certain conditions, the Buyer may get its money back. If the Seller holds the earnest money it is rarely returned, particularly if the Buyer fails or refuses to perform on the contract, regardless of the conditions. Hopefully your client has a relatively small amount of earnest money or deposit at stake if held by the Seller.

Paragraphs 6. and 7., title and property condition issues and notice requirements. Objections in a timely manner to problem issues in these areas can absolve a buyer from performing the contract.

Paragraph 15. Default. This paragraph provides remedies for breach of contract, with unfavorable provisions to be lined out and initialed by the parties during negotiations. Hopefully, a breach will boil down to a dispute over the earnest money and nothing more so the parties can disengage at the earliest opportunity. Paragraph 18 deals further with notices and demands relative to escrowed funds.