USA – TEXAS Law and Practice Contributed by: Taylor Cooksey, Philip Kinkaid, Serena Kramer and David Brooks, Cokinos | Young
day of each month. At least 21 days before the foreclosure sale, the lender must give notice of the sale which, among other statutorily required items, must be: • posted at the courthouse in the county where the property is located; • filed with the county clerk; and • served on the defaulting borrower. If a federal tax lien has attached to the property, notice of the foreclosure sale must be given to the IRS at least 25 days before the sale; other - wise, the tax lien will not be extinguished by the foreclosure. 3.7 Subordinating Existing Debt to Newly Created Debt It is possible for existing secured debt to become subordinated to newly created debt by agree - ment. Subordination agreements will cause an existing lender to become lower in lien prior - ity and repayment. This can occur in situations where a borrower is seeking additional financ - ing or is restructuring its debt to raise additional financing. New lenders may require existing debt to be subordinated to their loan before they will extend credit. The existing (subordinated) lenders must agree to any subordination before the newly created debt will have priority. A subordinated lender may seek to negotiate a loan modification or other concession from its borrower in return
released or disposed of. It includes a secured creditor exemption that protects lenders from owner/operator liability if they hold ownership in a CERCLA facility primarily to protect their secu - rity interest, and they do not “participate in the management of the facility” , meaning that their actions are limited to those of a typical lender, such as inspecting the property, providing finan - cial advice or monitoring the borrower’s financial condition. The lender is barred from undertaking responsibility for hazardous substance handling or disposal practice, and from exercising control at a level similar to that of a manager of the facil - ity. Texas has enacted similar state-level exemp - tions for secured creditors. 3.9 Effects of a Borrower Becoming Insolvent In Texas, a lender’s lien or security interest is still valid even if the borrower becomes insolvent. A borrower’s bankruptcy is typically an auto - matic event of default under a deed of trust that results in immediate acceleration of the debt (ie, foreclosing). However, this type of provision is unenforceable under the Bankruptcy Code as a so-called “ipso facto” clause. A borrower’s bankruptcy will trigger the Bankruptcy Code’s automatic stay, which prevents the lender from either foreclosing on the property or exercising other remedies against the borrower. The lend - er may nevertheless be able to seek from the bankruptcy court relief from the automatic stay to enforce its lien or security interest. 3.10 Taxes on Loans Texas does not impose a mortgage tax or a doc - umentary transfer tax in connection with mort - gage loans or mezzanine loans related to real estate, including the granting or enforcement of liens and security interests. Nominal recording fees that vary from county to county apply to the recordation of security instruments.
for its agreeing to a lower priority. 3.8 Lenders’ Liability Under Environmental Laws
The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) imposes broad liability on owners and operators of facilities where hazardous substances were
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