Texas Commercial Law Firm

Unfortunately, it is not clear to which “notice” Section 51.0025 refers when it requires the Disclosure be given in “the notice required under section 51.002.” There is uncertainty as to which notice this applies because section 51.002 has three distinct notice requirements. For example, section 51.002(b) concerns the notice of sale which must be provided to the borrower and the notice of sale which must be posted and filed with the county clerk. Sections 51.002(d) and (e) concern the “right to cure” notice which is required to be sent to the borrower in advance of acceleration and which is frequently sent by the mortgage servicer.

Based on the plain meaning of the statute and in the absence of case law interpreting these provisions, it would appear that the safest practice is for the Disclosure to be provided in all notices required under Section 51.002. This most conservative approach would dictate including the Disclosure in the right to cure notice, the notice of acceleration and notice of sale.

2. Mortgage Servicers May Now Appoint Substitute Trustees.

One of the most significant changes to Texas law and current foreclosure practice resulted from new Section 51.0075's granting to mortgage servicers the authority to appoint substitute trustees if so authorized by the mortgagee through power of attorney or other written instrument:

A mortgagee may appoint or may authorize a mortgage servicer to appoint a perpetual substitute trustee by power of attorney or other written instrument. The power of attorney or written instrument must be signed by the mortgagee's representative, acknowledged, and sworn to with a jurat.

Texas Legislature HB 1493, Property Code Sec. 51.0075 (2004)

Background. Many of the changes to Texas foreclosure law, and in particular, this provision, were enacted in response to a Texas Court of Appeals decision (Nicholson vs. Washington Mutual, F.A., 2001 WL 1002418 (Tex. App.–Corpus Christi) (not designated for publication) in which the mortgage servicer appointed the substitute trustee even though the deed of trust required the substitute trustee to be appointed by the “lender”. The borrower sued for wrongful foreclosure and wrongful eviction arguing that the mortgage servicer was not authorized under the deed of trust to appoint the substitute trustee and that the foreclosure sale was therefore void. The Court of Appeals overturned the District Court summary judgment in favor of the lender and remanded the case to the District Court. The Court of Appeals held there was a question of fact as to whether the mortgage servicer could properly appoint the substitute trustee. In fact, the clear implication in Nicholson was that the mortgage servicer was not authorized to appoint the substitute trustee and that the sale was therefore void.

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