Texas Real Estate State Practice Exam

What type of clause does a Deed of Trust in Texas include that allows for "Non-judicial foreclosure"?

1. Acceleration Clause

2. Defeasance Clause

3. Escalation Clause

4. Power of Sale Clause

The correct answer is: Power of Sale Clause

The correct answer is indeed the Power of Sale Clause. This type of clause is significant within a Deed of Trust, as it explicitly grants the lender the right to initiate a non-judicial foreclosure process in the event of borrower default. Essentially, this means that if the borrower fails to meet their mortgage obligations, the lender can take control of the property and sell it without having to go through the court system, which simplifies and speeds up the process of reclaiming the property. In Texas, this clause is essential because it enables quicker resolution for lenders, allowing them to manage defaulted loans more efficiently and reduce losses associated with prolonged legal proceedings. The Power of Sale Clause facilitates this process by outlining the terms under which the lender can proceed to sell the property following a default, typically after a notice period is provided to the borrower. The other clauses listed do not serve the same purpose. For instance, the Acceleration Clause allows the lender to demand the full repayment of a loan if payments are missed, but it does not specifically address non-judicial foreclosure proceedings. The Defeasance Clause, often used in some types of loans, indicates that the borrower has fulfilled their obligations and the lender's rights are satisfied, while the Escalation Clause