USA - TEXAS Law and Practice Contributed by: Brad Holdbrook, Mary Mendoza, Michael Coleman and James Barnett, Haynes and Boone, LLP
3.5 Legal Requirements Before an Entity Can Give Valid Security In Texas, the main legal requirements before an entity can provide valid security over its real estate assets involve ensuring the secu - rity agreement is in writing, signed by the party granting the security interest (debtor), and rea - sonably identifies the secured property. The security interest is typically “perfected” through filing a financing statement with the appropriate government office to put third parties on notice. While Texas does not specifically enforce “finan - cial assistance” rules as known in other juris - dictions, the transaction must not violate any statutes, including without limitation any provi - sion of the Texas Business Organizations Code or prohibitions on usurious interest in the Texas Finance Code. 3.6 Formalities When a Borrower Is in Default When a borrower defaults on a mortgage loan for property in Texas, the foreclosure process typically involves non-judicial means. The fore - closure process starts with the borrower signing a promissory note and a deed of trust, which includes a power of sale clause allowing the lender to sell the property non-judicially if the borrower fails to make payments. Upon default, the lender must send a notice of default and intent to accelerate, giving the borrower at least 20 days to cure the default. After this period, a Notice of Sale must be mailed to the borrower at least 21 days before the foreclosure sale, also being posted at the courthouse door and filed with the county clerk. The foreclosure sale itself is public, with the highest bidder becoming the new owner of the property. Texas law does not provide a right to redeem the property after a foreclosure sale. However, borrowers have specific rights, includ -
Code, lenders do not need to file a separate assignment of rents in addition to the deed of trust to perfect a security interest in the rents for a given property as recordation of the deed of trust automatically perfects such an interest. Other common securities include mezzanine financing, which is secured by equity interests in the entity that owns the real estate. Develop - ers might also use construction loans for devel - opment projects, which are disbursed in stages based on construction progress and in addition to collateral assignments of agreements related to the design and construction of the projects are secured by a deed of trust. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders Generally, in the United States, including Texas, there are not significant restrictions on grant - ing security over real estate to foreign lenders compared to domestic lenders. Both foreign and domestic lenders can take security interests in real estate. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security In general, when securing real estate with a deed of trust or other security instruments in Texas, parties might incur certain costs such as record - ing fees for the deed of trust in county records to perfect the lien, and notary fees for the execution of documents. Texas does not impose a docu - mentary stamp tax on mortgages or deeds of trust, which differentiates it from other states. Similar to recording fees generally, fees imposed for granting or enforcing a secured interest in real property will vary by county.
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