Lender improperly sent notice of default in Texas

Lender improperly sent notices to homeowner in Texas

IN RE: BRENDA COLEMAN CUNNINGHAM, DEBTOR. BRENDA COLEMAN CUNNINGHAM, PLAINTIFF, vs. DOVENMUEHLE MORTGAGE, INC., et al., DEFENDANTS.
CASE NO. 05-32951-SGJ-13, ADVERSARY NO. 07-03012

Case Law
UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION
2008 Bankr. LEXIS 2724

April 9, 2008, Decided

Facts: The creditor was the holder of a promissory note and a deed of trust securing a mortgage on the debtor's home. The creditor sent the debtor notices of default and subsequently sent the debtor a notice of foreclosure sale. The first notice of default only gave the debtor 10 days opportunity to cure, rather than the required 20 days. Although the second notice gave the debtor 30 days to dispute the debt, the foreclosure sale notice under § 51.002(b) was sent only 12 days after that notice.

Issue: Whether there was compliance with the notice

Ruling: None. The court held that the creditor did not comply with the two-step process required under § 51.002(b) and § 51.002(d). The court held that the first notice did not count as the § 51.002(d) notice, even though the debtor in reality had more than 20 days to cure, because the notice had to explicitly give the debtor 20 days to cure. The court also held that the second notice did not count as the § 51.002(d) notice because, although it gave the debtor at least 20 days to dispute the debt, the foreclosure sale notice was improperly sent before the expiration of the 20-day period.

Lesson Learned: In order to pursue the remedy of a nonjudicial foreclosure sale on a homestead in Texas, there is a prerequisite that the mortgage servicer of the debt shall first serve upon a debtor who is in default a written notice, by certified mail, stating that the debtor is in default and giving the debtor at least 20 days to cure the default before notice of an intended foreclosure can be given. Tex. Prop. Code Ann. § 51.002(d). Then, assuming there is no cure within that first 20-day notice period, a subsequent notice of a foreclosure sale can be given, providing at least 21 days notice of the intended sale (with sales occurring on the first Tuesday of the month in Texas, the so-called "Foreclosure Tuesday"). That second notice must also be made by certified mail on each debtor who is obligated on the debt.

Written by Kevin Levonas and Jerry L.