The Texas Senate has approved a bill that would lengthen the period of time between notice of default and placing of distressed properties on bank forclosure list for sale. The bill, which is currently pending on the Texas House for approval, would give more time to troubled homeowners to seek legal assistance, talk to their lenders and rework their loans or find buyers for their properties.

Texas gives distressed homeowners 41 days to save their properties from foreclosure. According to the Texas Housing and Community Affairs Department, the state has the shortest period for homeowners to lose their properties to foreclosure.

Jane Junkin of Houston Acorn said that there is a great need to help troubled homeowners, especially older people who took out adjustable-rate mortgage loans.
Under the current Texas law, lenders and banks are allowed to foreclose on 25,259 houses in the first three months of this year. The number of Texas residences at risk of foreclosure increased by 14 percent from the last quarter of 2008.

According to real estate data provider RealtyTrac, Texas foreclosure rate for the first quarter was higher compared with the country’s 9 percent increase for the period. Furthermore, the state’s unemployment rate jumped by 6.7 percent in March from last year’s 4.6 percent rate.

Under the bill, sponsored by Texas Senator Craig Estes and proposed by Attorney General Greg Abbott, the initial phase of the foreclosure proceeding would be extended from 20 days to 45 days. The lending institutions’ lobbying organization, Independent Bankers Association is supporting the bill to lengthen the foreclosure process.

Independent Bankers Association executive vice president Stephen Scurlock said that majority of banks already give troubled borrowers more than 45 days to find ways to avoid foreclosures. He explained that lenders start foreclosure proceedings only after distressed homeowners have missed 90 days of mortgage payments and received several notices of defaults.

Scurlock pointed out that most lenders and banks try their best to work with homeowners because they do not also want to add properties on the bank forclosure list.

Meanwhile, advocates of the bill also want mediation and a judicial review of foreclosure involving adjustable-rate mortgage loans.

Real estate agent Brenda Rogers said that the extra time provided to distressed homeowners by the bill would greatly help them sell their properties before it would be placed on bank forclosure list.