Acceleration

The Texas Foreclosure Manual

Texas Foreclosure Manual, Includes 2019 Supplement. This essential resource, written for the general practitioner and real estate expert in mind, provides over 100 forms covering everything from the first consultation with a client to closing the file. It also addresses the why behind the how with 37 chapters of practice notes.

LIT COMMENTARY

The Texas Foreclosure Manual – co-authored by foreclosure mill lawyer Tommy Bastian of BDF Group, Addison, Texas is used by the judiciary to expedite foreclosures in Texas.

A co-author, Marty Novack was sued by a client for cheating and his firm settled.  Tommy Bastian and his foreclosure mill law firm, BDF Group in Addison is so ingrained into the Texas Bar and Texas Supreme Court, he practically wrote the expedited foreclosure rules – as admitted herein.

These legal rats, mainly working on behalf of themselves as rogue debt collecting law firms or as agents for Banks and Wall St., are hard at work ensuring Texas homeowners do not have a fair hearing in court when these aggressive creditor rights lawyers start [il]legal foreclosure proceedings.

LIT has plenty of evidence to prove it’s bold claims of judicial corruption in Texas – it’s right here on LIT.

LISA M. TATUM
PRESIDENT

Direct Correspondence to:
LM TATUM, PLLC
111 SOLEDAD ST., STE. 358 SAN ANTONIO, TX 78205 TEL: (210) 299-7616
FAX:  (210) 299-7716
LTatum@Tatum-Law.com

The State Bar of Texas is proud to publish this third edition of the Texas Foreclosure Manual. Originally published in 1991, this manual continues the tradition of being the premier resource for Texas lawyers whose practice includes foreclosures. It broadens the number of topics covered in the second edition, particularly in light of mortgage securitization.

Our sincere thanks are given to the editors, Bill Locke, Marty Novak, and Tommy Bastian, and the contributing authors who have labored diligently in bringing this expanded edition of the manual to fruition. The Bar is grateful for their generosity and commitment in producing this valuable contribution to the practice of law.

Lisa M. Tatum
President, State Bar of Texas

The State Bar of Texas, through its TexasBarBooks Department, publishes practice books prepared and edited by knowledgeable authors to give practicing lawyers and judges as much assistance as possible. The competence of the authors ensures outstanding professional products, but, of course, neither the State Bar of Texas, the editors, nor the authors make either express or implied warranties in regard to the use or freedom from error of this publication. In the use or modification of these materials, each lawyer must depend on his or her own expertise and knowledge of the law.

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that (1) this written material was not intended or written by the author(s) to be used for the purpose of avoiding federal penalties that may be imposed on a taxpayer; (2) this written material cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer; (3) this written material cannot be used in promoting, marketing, or recommending to another party any tax-related transaction or matter; and (4) a taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

The use of the masculine gender in parts of this manual is purely for literary convenience and should, of course, be understood to include the feminine gender as well.

International Standard Book Number: 978-1-938873-06-5 International Standard Book Number: 978-1-938873-34-8 (2015 Supplement) International Standard Book Number: 978-1-938873-53-9 (2018 Supplement) International Standard Book Number: 978-1-938873-75-1 (2019 Supplement)

Library of Congress Control Number: 2014935946

© 1991, 2006, 2008, 2010, 2012, 2014, 2015, 2018, 2019 State Bar of Texas

Austin, Texas 78711

All rights reserved. Permission is hereby granted for the copying of any part of this publication by a photocopy or other similar process or by manual transcription, by or under the direction of licensed attorneys for use in the practice of law. No other use is permitted that will infringe the copyright without the express written consent of the State Bar of Texas.

Printed in the United States of America Third Edition, 2014

TEXAS FORECLOSURE MANUAL

Third Edition

WILLIAM H. LOCKE, JR.

Bill Locke is a shareholder with Graves, Dougherty, Hearon & Moody, A Professional Corporation, in Austin, Texas.

He earned both his B.A. and J.D., with honors, from the University of Texas and was admitted to the bar in 1972. He is a twenty-year maintaining member of the College of Law of the State Bar of Texas; fellow member of the Texas Bar Foundation; director of the Real Estate, Probate and Trust Law Council; and a founding director of the Texas College of Real Estate Lawyers.

He is a former president of the Corpus Christi Bar Association. He is listed in The Best Lawyers in America for real estate, Who’s Who in America, and Who’s Who in American Law, is a fellow of the American College of Real Estate Lawyers, is a frequent speaker for continuing legal education programs, and is the author of numerous articles relating to real estate law.

He is board certified in commercial real estate, residential real estate, and farm and ranch real estate law.

In addition to  conceiving and bringing to fruition this book, which is an outgrowth of experiences in the economic downturn of the 1980s and his desire to help other practitioners avoid traps for the unwary, he regards the following as accomplishments: establishing the Palmer Drug Abuse Program in Corpus Christi in 1979 and in Austin in 2000 as programs helping teens and young adults recover from alcohol and drug abuse; conceiving of obtaining designations of the Corpus Christi Aquarium as the official aquarium of the state of Texas and the Mexic-Arte Museum of Austin, Texas, as the official Mexican and Mexican American fine art museum of Texas; and conceiving and participating in the implementation as chairman of the Corpus Christi Zoning and Planning Commission of the neighborhood zoning plan process for the city of Corpus Christi.

RALPH MARTIN NOVAK, JR.

Marty Novak recently retired. Formerly, he was a real estate attorney in the Office of the General Counsel at the University of Texas. Before joining the University of Texas System, he was a partner at Brown McCarroll L.L.P., Hilgers and Watkins, P.C., and Kleberg, Dyer, Redford and Weil, P.C. He is board certified by the Texas Board of Legal Specialization in commercial real estate and is a mem- ber of the College of the State Bar of Texas.

Over the years he has been a frequent speaker for continuing legal education programs offered by the State Bar of Texas, the University of Texas School of Law, and the University of Houston Law Center.

In addition to being coauthor of the Texas Foreclosure Manual, he has contributed to the mechanic’s lien section of the Texas Collections Manual published by the State Bar of Texas and is the author of Christianity and the Roman Empire: Background Texts, a widely praised work on early Christian history that has been used as required reading at a number of universities in the United States and abroad.

Mr. Novak holds a Bachelor of Arts in History and Anthropology, with honors, from Rice Uni- versity (1973); a Masters Degree in Roman History from the University of Chicago (1975); and a Doctor of Jurisprudence, with honors, from the University of Houston (1982). He is married to Amy Novak and has two children, Becky and Michael.

TOMMY BASTIAN

Tommy Bastian, board certified by the Texas Board of Legal Specialization in residential real estate law, focuses his practice on mortgage banking issues related to title, real estate, probate, and class-action litigation, as well as legislative matters.

He is the author of more than fifty articles and publications, including a chapter in the Texas Practice Series, Texas Foreclosure: Law and Practice. He has served as a frequent lecturer on both state and national issues related to mortgage banking.

Mr. Bastian is a graduate of Howard Payne University, Texas Tech Law School, the U.S. Army Command and General Staff College, and the U.S. National Defense Security University.

He is actively involved in the Texas Mortgage Bankers Association, American Land Title Association Education Committee, Mortgage Banking Association, and Texas Land Title Association. In 2006, he served on the Residential Foreclosure Task Force mandated by Texas House Bill 1582 and was the course director for the State Bar’s Advanced Real Estate Law Course.

Mr. Bastian served as the principal drafter for the three Texas Supreme Court Task Forces responsible for creating Rules 735 and 736 dealing with foreclosure of home equity, reverse mortgage, home equity line of credit, and transferred tax liens.

He received the Texas Mortgage Bankers Distinguished Service Award in 2010. He enjoys cultivating roses, which he then uses to illustrate many of his CLE presentations.

STATE BAR OF TEXAS

2013–2014

LISA M. TATUM, President

CINDY TISDALE, Chair of the Board

GARY NICKELSON, Chair, Board Professional Development Subcommittee

DEBORAH J. BULLION, Chair, Continuing Legal Education Committee

MICHELLE HUNTER, Executive Director

SHARON SANDLE, Director

JILL HOEFLING, Assistant Director

DAVID W. ASHMORE, Project Publications Attorney

ELMA E. GARCIA, Publications Attorney

SUSANNAH  R. MILLS, Publications Attorney 

JAMES W. NORMAN, Publications Attorney

VICKIE TATUM, Publications Attorney

MICHAEL AMBROSE, Senior Editor

COURTNEY CAVALIERE, Editor 

ROGER SIEBERT, Editor

TRAVIS RIDDLE, Production Supervisor

JENNIFER TOWNSEND, Production and Editorial Assistant

CYNTHIA DAY, Meeting Coordinator

LARA TALKINGTON, Marketing Coordinator

CONOR JENSEN, Website Manager

JENNIFER KARLSSON, Web Content Specialist

JENNIFER PEREZ, Web Content Specialist

ANISSA SAMANIEGO, Sales Coordinator

Contents

VOLUME 1

Letter from the President of the State Bar of Texas Preface

Acknowledgments Summary of Contents

How to Download This Manual Introduction

  • Attorney-Client Relations
  • Getting Started—Information Required
  • Evaluating the Options for Collecting the Debt
  • Preforeclosure Title Concerns
  • The Note in Foreclosure
  • The Deed of Trust
  • Consumer Debt Collection Laws
  • Demand for Payment, Notice of Intent to Accelerate, and Notice of Acceleration
  • Collection of Rent by Lender before Foreclosure
  • Borrower Challenges to Foreclosure and Lender Responses
  • Trustees and Substitute Trustees
  • Notice of Foreclosure Sale
  • Bid Evaluation

VOLUME 2

  • Conducting the Sale
  • Postsale Considerations
  • Consequences of Wrongful Foreclosure
  • Suits for Deficiency

18–19 reserved

  • Judicial Foreclosure
  • Residential Foreclosure Process
  • Commercial Foreclosure Process
  • Tax Consequences of the Foreclosure Process
  • Foreclosures Resulting from Ad Valorem Taxation
  • Property Tax Loan Foreclosure Process
  • Deceased Mortgagor Foreclosure Process
  • Condominium Foreclosures
  • HEL/HELOC Foreclosure Process
  • Manufactured Housing Unit Foreclosure Process
  • Property Owners Association Foreclosure Process
  • Reverse Mortgage Foreclosure Process
  • USDA Farm, Ranch, and Housing Loan Foreclosures
  • Servicemembers Civil Relief Act
  • Residential Evictions Following Foreclosure
  • Environmental Issues Affecting the Foreclosure Process
  • Federal and State Foreclosure Assistance Programs
  • Miscellaneous Topics

Appendix A—IRS Collection Advisory Group Addresses and Counties by Areas Appendix B—Texas County Foreclosure Resources

Statutes and Rules Cited Cases Cited

List of Forms by Title Subject Index

Preface

While representing numerous clients during the savings and loan and foreclosure crisis of the late 1980s and early 1990s, Bill Locke and Marty Novak recognized the need for a lawyers’ guide to Texas foreclosure practice.

For the last twenty-three years, beginning in 1991, Mr. Locke and Mr. Novak have devoted countless hours to writing, editing, and supplementing two editions of the State Bar’s Texas Foreclosure Manual.

Except from a harried lawyer who knew little about foreclosure but breathed a sigh of relief and a silent “thank you” when discovering the treasure trove of materials in the Texas Foreclosure Manual, Mr. Locke and Mr. Novak have worked on the manual with little fanfare or recognition.

Because securitization has radically changed mortgage banking and brought with it radical changes to foreclosure practices, Mr. Locke and Mr. Novak recognized the need for a new edition of the Texas Foreclosure Manual that melded the still relevant presecuritization materials from the first two editions of the manual with the new developments in foreclosure law caused by the mortgage banking meltdown and foreclosure crisis that began in 2008.

The mechanics of conducting a foreclosure (that is, the demand, cure, acceleration, notice of sale, and public sale process outlined in the previous two editions) have remained the same.

But the answers to questions like who has the authority to foreclose, whether the law pertaining to the note or the deed of trust controls the foreclosure process, the effect of the mortgage servicer replacing the owner or beneficiary of the note in foreclosure, the role of MERS in the foreclosure process, and the merits of new legal theories and defenses have changed significantly since the second edition of the manual was published.

This new third edition of the Texas Foreclosure Manual updates the current body of foreclo- sure law and practice and continues the tradition of serving as one of the premier guides on how to conduct a Texas foreclosure.

While Mr. Locke and Mr. Novak remain active as editors and contributors to the production of a new edition of the manual, the authorship and format of the third edition have changed significantly.

Adopting the motto that “a team that divides its tasks multiplies its success,” twenty-one lawyers with hands-on, down-in-the-trenches experience in prosecuting or defending foreclosures on a daily basis agreed to contribute their foreclosure expertise by updating and drafting new chapters for the third edition of the Texas Foreclosure Manual.

Consequently, anyone using the new edition of the manual will be guided by lawyers whose contribution to the manual is the result of actually handling hundreds of matters related to their area of foreclosure specialization.

Besides the introduction of new contributing authors to the manual, the format of the third edition has also changed.

The first seventeen chapters provide a general overview of the various elements that are important to consider in conducting a foreclosure.

The subsequent chapters compose the “how-to-do” section of the manual.

In the final eighteen chapters, subject matter experts guide the reader through how to conduct a residential or commercial foreclosure and the more esoteric foreclosure areas like property owners association liens, reverse mortgages, and property tax loan foreclosures, and they address changes in specific areas of law, such as environmental issues affecting foreclosure, the Servicemembers Civil Relief Act, and the role of Mortgage Electronic Registrations Systems, Inc.

The objective of the third edition of the Texas Foreclosure Manual is to make it the best source of foreclosure expertise available.

Lawyers—being lawyers—may not agree with the editors’ and contributors’ opinions on the law or how to handle certain aspects of a foreclosure.

In this regard, we believe Thomas Jefferson’s maxim:

“An error in opinion can be tolerated if reason or methodology is free to correct the opinion.”

With this premise in mind, any reader may contact the editors with a written rejoinder so that any necessary clarification or correction can be made at TexasBarBooks, State Bar of Texas, P.O. Box 12487, Austin, Texas 78711-2487, books@texasbar.com.

Tommy Bastian, General Editor

Acknowledgments

When it comes to foreclosures, superior performance depends on superior learning, and it is hoped that the new third edition of the Texas Foreclosure Manual will provide superior learning for any lawyer seeking to provide superior foreclosure legal services for the lawyer’s clients or employer.

Twenty-one contributing authors made this new edition possible. The editors would like to acknowledge and thank all the persons named below who participated in the mammoth project of rewriting the third edition, which is still a work in progress.

Tommy Bastian | Bill Locke | Marty Novak

Contributing Authors

NATHAN  T. ANDERSON

McGlinchey Stafford, PLLC

Update by LIT;

Nathan Anderson is now Vice President, Assistant General Counsel at Goldman Sachs.  “I lead Goldman Sach’s consumer and small business lending products on all legal issues arising under servicing and collections. Part of my duties involve providing guidance on UDAAP, ECOA, TILA, FCRA, the FDCPA, as well as state specific laws pertaining to fair lending, collection and deceptive trade practice laws. Additionally, I assist in investigations initiated by state and national regulatory and enforcement agencies, as well as civil litigation matters.”

BRIAN  S. BELLAMY

Savrick, Schumann, Johnson, McGarr, Kaminski & Shirley, LLP

LIT Update: Now working at Stavros & Kelly, a foreclosure mill in Austin.

ROBERT D. FORSTER, II

Barrett Daffin Frappier Turner & Engel, LLP

CHALISE  R. FREITAG

Vantium Capital, Inc.

LIT Update;

Chalise Freitag is now VP, Regulatory Compliance Counsel at Freedom Mortgage, Monument, Colorado, United States

LESLIE S. JOHNSON

Winstead, PC

LIT Update;

Leslie Johnson is now VP, Texas State Counsel at WFG National Title Insurance Company

CHARLES KRAMER

Hunter & Kramer, P.C.

CLIFFORD LITTLEFIELD

Upton, Mickits & Heymann, L.L.P.

EDWARD  LOPEZ, JR.

Linebarger Goggan Blair & Sampson, LLP

RICHARD MELAMED

Richard Melamed, PLLC

BRIAN T. MORRIS

Winstead, PC

MANUEL H. NEWBURGER

Barron & Newburger, P.C.

BRADY E. ORTEGO

Roberts Markel Weinberg Butler Hailey, PC

DEAN RIDDLE

Riddle & Williams, P.C.

JASON  L. SANDERS

Locke Lord LLP

MICHAEL J. SCHROEDER

Michael J. Schroeder, P.C.

LEE STEVENSON, JR.

Stevenson & Ricker

DAVID TOMEK

David Tomek, PLLC

CONNIE J. VANDERGRIFF

Barrett Daffin Frappier Turner & Engel, LLP

DOMINIQUE MARSHALL VARNER

Hughes Watters Askanase, LLP

EDWARD  F. WALKER

Cramer Weatherbie Richardson Walker, LLP

LIT Update;

Now attorney at Edward Walker.

LAWRENCE YOUNG

Hughes Watters Askanase, LLP

Contributing Authors 2015 Supplement

MARC  D. CABRERA

Locke Lord LLP

LIT Update;

Marc D. Cabrera is now a Shareholder at Polsinelli.

BRADY E. ORTEGO

Roberts Markel Weinberg Butler Hailey, PC

JASON  L. SANDERS

Locke Lord LLP

LIT Update;

Jason L. Sanders is now Founding Member at Sanders Collins PLLC

Contributing Authors 2018 Supplement

BRIAN BELLAMY

Savrick, Schumann, Johnson, McGarr, Kaminski & Shirley, LLP

MARC D. CABRERA

Locke Lord LLP

LIT Update;

Marc D. Cabrera is now a Shareholder at Polsinelli.

CHARLES FLOYD

Capital One Services, LLC

LIT UPDATE;

Charlie Floyd is now Associate General Counsel at Gateway First Bank.

ROBERT D. FORSTER, II

Barrett Daffin Frappier Turner & Engel, LLP

TRAVIS GRAY

Jack O’Boyle & Associates

CLIFFORD LITTLEFIELD

Upton, Mickits & Heymann, L.L.P.

EDWARD  LOPEZ, JR.

Linebarger Goggan Blair & Sampson, LLP

BRIAN T. MORRIS

Winstead, PC

JACK O’BOYLE

Jack O’Boyle & Associates

BRADY E. ORTEGO

Roberts Markel Weinberg Butler Hailey, PC

JUAN  M. PEQUEÑO, JR.

Jones, Galligan, Key & Lozano, L.L.P.

DEAN A. RIDDLE

Riddle & Williams, P.C.

RUDY SALINAS, JR.

Jones, Galligan, Key & Lozano, L.L.P.

JASON  L. SANDERS

Sanders Collins PLLC

CONNIE J. VANDERGRIFF

Barrett Daffin Frappier Turner & Engel, LLP

Summary of Contents

A detailed chapter table of contents immediately follows the tab divider for each chapter.

Introduction

Description of the manual and how to use it

1        Attorney-Client Relations

Discussion of the regulation of lawyers and law practice and accountability for professional responsibility, with emphasis on foreclosure practice

2        Getting Started—Information Required

Practice notes and forms for obtaining the necessary information and documents that pertain to the debt in default so that the attorney may fully understand the agreements between the borrower, the mortgagor, and the lender concerning the debt and the collateral

3        Evaluating the Options for Collecting the Debt

Practice notes and forms that explore the alternatives to foreclosure

4        Preforeclosure Title Concerns

Practice notes and forms for identifying title-related matters that can affect foreclosure

5        The Note in Foreclosure

Practice notes discussing the enforcement of a promissory note secured by a deed of trust

6        The Deed of Trust

Practice notes discussing the deed of trust as a contract between the mortgagor, the trustee, and the mortgagee

7        Consumer Debt Collection Laws

Discussion of the federal Fair Debt Collection Practices Act and the Texas Debt Collection Act as they apply to the foreclosure process

8        Demand for Payment, Notice of Intent to Accelerate, and Notice of Acceleration

Practice notes and forms addressing the processes involved in giving notice of default, notice of intent to accelerate, and notice of acceleration

9        Collection of Rent by Lender before Foreclosure

Practice notes and forms for use by the mortgagee in perfecting its claim to preforeclosure rent and collecting rent from the mortgagor

10    Borrower Challenges to Foreclosure and Lender Responses

Discussion of the jurisdiction and forum issues applicable to foreclosure actions, common claims borrowers assert seeking to invalidate liens or contest foreclosure, and lender responses and defenses

11    Trustees and Substitute Trustees

Practice notes and forms addressing the role, power, and duties of the trustees and substitute trustees during the foreclosure process

12    Notice of Foreclosure Sale

Practice notes and forms addressing the process involved in giving the requisite notices of the foreclosure sale

13    Bid Evaluation

Practice notes and forms addressing the factors relevant to determining the mortgagee’s bid at a foreclosure sale

14    Conducting the Sale

Practice notes and forms addressing how to conduct a valid foreclosure sale

15    Postsale Considerations

Practice notes and forms addressing matters that arise after a foreclosure, including distribution of sale proceeds, the purchaser’s right of possession, and third-party interests such as tenants and taxes

16    Consequences of Wrongful Foreclosure

Practice notes addressing the basic legal remedies available to the mortgagor for the mortgagee’s wrongful foreclosure

17    Suits for Deficiency

Practice notes and forms addressing the calculation of the deficiency, parties who may be liable, the statutes governing the recovery of a deficiency, the bringing of the deficiency suit, and the recovery of costs and expenses

[chapters 18 and 19 reserved]

20    Judicial Foreclosure

Practice notes and forms for use in a judicial foreclosure pursuant to rule 309 of the Texas Rules of Civil Procedure

21    Residential Foreclosure Process

Practice notes addressing the nonjudicial foreclosure process of residential real property

22    Commercial Foreclosure Process

Practice notes addressing the nonjudicial foreclosure process of commercial real property

23    Tax Consequences of the Foreclosure Process

Practice notes and forms addressing the federal income tax consequences to a taxpayer who receives an IRS Form 1099-A or 1099-C from a lender because of foreclosure or debt cancellation

24    Foreclosures Resulting from Ad Valorem Taxation

Practice notes and forms addressing the processes of assessment and imposition of taxes on nonexempt property and the process of foreclosure by local taxing units if the taxes are not timely paid by the property owner

25    Property Tax Loan Foreclosure Process

Practice notes and forms for use in a property tax loan foreclosure

26    Deceased Mortgagor Foreclosure Process

Practice notes and forms for use in a foreclosure after the death of the mortgagor

27    Condominium Foreclosures

Practice notes and forms for use in a condominium foreclosure

28    HEL/HELOC Foreclosure Process

Practice notes and forms for use in a home equity loan or home equity line of credit foreclosure

29    Manufactured Housing Unit Foreclosure Process

Practice notes addressing the foreclosure process involving a manufactured home

30    Property Owners Association Foreclosure Process

Practice notes and forms for use in a property owners association foreclosure

31   Reverse Mortgage Foreclosure Process

Practice notes and forms for use in a reverse mortgage foreclosure

32   USDA Farm, Ranch, and Housing Loan Foreclosures

Practice notes addressing the foreclosure process involving a USDA program loan

33   Servicemembers Civil Relief Act

Discussion of the Servicemembers Civil Relief Act as it applies to the foreclosure process

34   Residential Evictions Following Foreclosure

Discussion of the residential eviction process following foreclosure

35   Environmental Issues Affecting the Foreclosure Process

Discussion of state and federal environmental laws as they apply to the foreclosure process

36   Federal and State Foreclosure Assistance Programs

Discussion of the different types of state and federal assistance programs created to help homeowners whose loans are in default or at risk

37   Miscellaneous Topics

Discussion of the different topics that may arise in connection with foreclosure proceedings including receiverships, residential foreclosure consultants, fraudulent conveyances, and Americans with Disabilities Act compliance

Appendix A—IRS Collection Advisory Group Addresses and Counties by Areas

The two IRS Technical Service Group addresses in Texas with the counties composing each service group

Appendix B—Texas County Foreclosure Resources

Foreclosure sale sites and Internet resources for all 254 Texas counties

3 SAMPLE REFERENCES TO THE TEXAS FORECLOSURE MANUAL IN TEXAS COURT OPINIONS AND ORDERS

The Texas Foreclosure Manual (and case authority cited therein) provides an explanation that is noteworthy here and—not only does it seem focused on nonjudicial foreclosure sales—but it is more clear conceptually than the rather old cases cited above. It states that the purchaser of real property at a deed-of-trust foreclosure sale “succeeds to the position of the mortgagee” (i.e., acquiring its equitable title).

The manual states that the trustee is not necessarily required to concurrently execute and deliver the foreclosure sale deed, because the purchaser is deemed to have equitable title after the sale. The execution of the actual trustee’s deed (perhaps occurring later) transfers only the interest that the mortgagor had in the property at the time of the execution of the deed, which would be considered inferior and unenforceable vis-a-vis the superior rights of the purchaser.

 See WILLIAM H. LOCKE, JR., ET AL., TEXAS FORECLOSURE MANUAL 14–16 (3d ed. 2014). This seems consistent with the statements of the Fifth Circuit in Glenn , to the effect of, “mere delivery of the deed would unite the legal title with the equitable and superior title already vested in the [purchaser].” Glenn , 80 F.2d at 557.

Jones v. Wells Fargo Bank, N.A. (In re Jones), 573 B.R. 665, 673-74 (Bankr. N.D. Tex. 2017)

See William H. Locke, Jr., et al., Texas Foreclosure Manual, § 11.5 (3rd ed. 2014) (“Conventional wisdom, based on case law, is that there is no necessity to report and send new notices of the scheduled foreclosure sale date if a new trustee is appointed after the original notice of sale was mailed to the obligor of the debt, filed with the county clerk, and posted at the courthouse…. However, under Texas Property Code section 51.0075(e), failure to provide the borrower with twenty-one days’ notice of the name and address of the newly appointed trustee who will conduct the sale may create an unwanted litigation risk … To prevent litigation risks, new foreclosure sale notices with the name and address of the newly appointed trustee should be mailed and reposted so as to give the borrower twenty-one days’ notice of the newly appointed trustee.”)

George W. 59 Inv., Inc. v. Williams (In re George W. 59 Inv., Inc.), 526 B.R. 650, 660 n.55 (N.D. Tex. 2015)

Our research indicates we are not the first to wonder about the Lee opinion. See Baggett, Maturity of Debt and Real Property Foreclosures, in STATE BAR OF TEXAS, DEBT COLLECTION (1987), at G-136-37 (“Apparently the fact that the foreclosure was pursuant to the federal Ship Mortgage Act confused the court. . . . The long line of cases requiring an irregularity causing grossly inadequate consideration may not have been argued; or, the court may have reasoned that foreclosure under the Ship Mortgage Act would be governed by a different standard. . . . In any event, the clear Texas authority indicates that mere inadequacy of consideration alone will not invalidate an otherwise proper foreclosure.”) (citing Musick ); see also Locke Novak, Texas Foreclosure Manual, in STATE BAR OF TEXAS, 2 ADVANCED REAL ESTATE LAW (1988), at Z-135-36 (also viewing Lee as aberrant).

Georgetown Associates, Ltd. v. Home Federal Savings & Loan Ass’n, 795 S.W.2d 252, 255 n.2 (Tex. App. 1990)

Texas Foreclosure Manual Co-Author Marty Novack included in 8 attorneys sued for cheating. A $2.9M settlement reached in legal malpractice case

Originally Published; Feb 9, 2006  |  LIT Republished Oct 25, 2020

Eight former members of Austin law firm Hilgers & Watkins PC — including seven current attorneys at Austin firm Brown McCarroll LLP – have settled the last of several legal malpractice cases against them for $2.9 million.

The Travis County District Court case alleged the former Hilgers & Watkins attorneys aided a now-defunct, high-risk loan operation in cheating an Austin plaintiff and his two companies out of $4.5 million.

Hilgers & Watkins merged with Brown McCarroll in 2003. Brown McCarroll wasn’t a defendant in the lawsuit.

In 2003, Michael McCarthy and his Austin companies, Gowron LLC and MGM Holdings Inc., sued Hilgers & Watkins and attorneys Marty Novak, Tom Watkins, Mark Chouteau, Robert Reetz, David Rodriguez, Ben Hathaway, Bradley Stein and Albert Lin. The allegations included legal malpractice, negligence, breach of fiduciary duty, common law fraud, and civil conspiracy.

The settlement dismisses the McCarthy suit and all claims between the parties. It also marks the end of several other smaller lawsuits — all stemming from Hilgers & Watkins’ representation of Thomas Caufmann and his company, Capital Advantage.

The $2.9 million settlement nearly depletes the remainder of a $5 million liability insurance policy held by Hilgers & Watkins that was used to paid out to settle and defend the claims, says the plaintiffs’ attorney, Joe Webber of Austin.

Capital Advantage touted 14 percent to 18 percent returns on interest-only real estate loans, according to court documents filed by the plaintiffs.

Caufmann couldn’t be reached for comment.

“If Hilgers & Watkins had not vouched for Capital Advantage and told my clients that they would represent them as investors, my guy wouldn’t have invested a dime,” Webber says.

The defendants’ attorney, Sam Johnson of Scott Douglass & McConnico LLP in Austin, says his clients were paid a flat fee to prepare loan documents – the plaintiffs claim they were for investors and the defendants claim they were for Capital Advantage, “and it wasn’t our duty to investigate the transactions.”

McCarthy’s attorney, Webber, says: “The investors … were led to believe that they were represented by Hilgers & Watkins.”

Johnson says the settlement doesn’t show the defendants were liable in the case.

“We don’t agree with [the plaintiffs’] claims, but there were litigation risks and attorneys’ costs involved,” Johnson says. “The bottom line is they made us a settlement offer, and we took it.” Johnson says Capital Advantage wasn’t one of Hilgers & Watkins’ major clients — representing only about $200,000 in billings over a span of a year and a half.

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