Financially stressed Texas homeowners struggling to cope with mortgage debt could soon get a little more breathing room from the state's "fastest foreclosure in the West" foreclosure law under legislation that recently passed the state senate.

Presently, Texas homeowners in default on their mortgages can lose their homes in as little as 41 days - the shortest foreclosure process in the nation. The legislation would extend what's known as the "cure" period, the time a homeowner has to correct the problem between the filing of foreclosure papers and the sale date, from 20 to 45 days.

Texas foreclosures at record levels

The legislation comes at a time when foreclosures in Texas are at an all-time high. As many as one Texas home in 10 faces foreclosure, according to figures from the Mortgage Bankers Association. The Dallas Morning News reports that 5,500 Texas properties face foreclosure schedules this month and that foreclosures now account for the majority of home sales in some Dallas neighborhood.

The change would give financially pressured homeowners more time to find a solution to their difficulties. It could conceivably give a homeowner more time to work out a refinancing or loan modification, assuming the lender is willing to consider those options.

Other states extending process

The Texas foreclosure process has been described as "brutally short," according to the Houston law firm Balcom Law Firm, PC. Many other state have already extended their "cure" periods in response to the financial crisis, some of them dramatically - from 46 to 60 days to 110 to 125 days, giving borrowers six months to work out a solution. In other states, such as Illinois and Delaware, borrowers have as long as a year, according to Bloomberg News.

Though the minimum time from default to foreclosure sale is only 41 days in Texas, most lenders are said to be more flexible in working with borrowers. The current legislation extending the cure period is said to have the support of the Independent Bankers Association of Texas, a lobbying group.

Consumer groups say even more time needed

Consumer advocates are saying that even the extended period is too short. The Association of Community Organizations for Reform Now, (ACORN) and others are said to be pushing for extending the cure period to 90 days in the House version of the legislation.

However, for the bill to become law, both chambers must agree on the final legislation by June 1, after which the legislature is scheduled to adjourn until 2011. Texas Gov. Rick Perry has not taken a position on the bill, which was proposed by state Attorney General Gregg Abbott.

Current Texas law starts the foreclosure clock running when the lender sends a letter informing the borrower that he or she has 20 days to make delinquent payments or foreclosure proceedings will begin. After the 20 days have expired, the lender may file a foreclosure notice with the county clerk. Foreclosure sales must take place on the first Tuesday of the month, and at least 21 days after the notice of foreclosure was filed.

Published on May 18, 2009